Operator: Good afternoon, ladies and gentlemen. I am Katrina. Welcome to TIBCO's First Quarter 2013 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. The passcode for both the call and the replay is 19449674.
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 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 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 development or otherwise.
This conference call also includes certain financial information that has not been prepared in accordance with Generally Accepted Accounting Principles. We believe that such information is useful for understanding our financial conditions 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 participants on the call are Vivek Ranadive, TIBCO's Chairman and CEO; Murray Rode, Chief Operating Officer; and Sydney Carey, Chief Financial Officer.
I would now like to turn the call over to Vivek.
Vivek Ranadive - Chairman and CEO: Well, thanks Katrina, and thank you all for joining us. I will begin with a few remarks on our Q1 performance. Murray and Sydney will then discuss operating details before turning it over for Q&A. in summary, we met expectations on EPS this quarter and demand for our professional services, maintenance and cloud offerings were strong. However, we fell short of our objectives on license revenue growth. As reported, total revenue came in at $238 million. Licensed revenue was $78 million.
Non-GAAP operating margins were 19% and non-GAAP EPS was $0.18. We are not happy with this performance. While demand for our products and solutions remained strong, execution issues continue to hinder our results, while it is possible that macro pressures had an impact in select corners of our business that does not explain this quarter's performance. Our issues are primarily execution related and there remains work in process on some of the positive changes we instituted, beginning last quarter.
We still closed a number of large and strategic transactions this quarter, and as Murray will discuss, our mid-sized deal mix is performing well. Our cloud business is building healthy rates, but for the exaggerated effect of a handful of deals our performance this quarter would looked markedly better and I can truly say from my many conversations with customers and prospects, our value proposition and differentiation has never been greater. The market appetite is there and growing. While our work is not complete, I am confident that we are doing the right things to steady our performance and deliver our next leg of growth. We are addressing targeted areas of development and need across our organization and I look forward to keeping you apprised as to progress in future quarters. Since our earliest days, we have committed to being the best-of-breed platform for infrastructure software. I have also long maintained that the line between infrastructure and applications would increasingly blur over time. The conjunction of these two realities presents new challenges and opportunities for us.
Firstly, on the infrastructure front, the battle for best-of-breed, we have fought and we have won. Many smaller players and competitors of years passed are no longer in business. SAP, IBM and Oracle all tried their hand. But let's not forget we created this market and we have grown and thrived in this market. Still the landscape evolves.
Today, larger players such as IBM and Oracle have effectively given up competing for functional equivalents and they now tout a notion of good enough infrastructure software. Let me make this clear there is no such thing as good enough infrastructure. Enterprises today require a platform that marries transactions with events. One that make sense of both data addressed and data in motion and a platform that sets the intersection of cloud, mobile, social and big data forces. Oracle doesn't do this. IBM, SAP and Microsoft don't do this. So, quite simply good enough isn't. We need to do a better job of making this notion clear in the marketplace.
Take a recent example from the travel and hospitality industry. In Q1, we were told that we had lost a deal to IBM that we cultivated for weeks, but that was not the end of the deal. Our team committed to the customers' success and ascertained that our solution was the best and only solution that would meet their strict requirements, fought back, escalated to the CIO and a few weeks later, we signed a seven figure deal. Our message to him was simple. First, our technology is simply better, but you already know that, since we won every single evaluation. More to the point, the other technologies just will not work. Second, we're going to command fair value for our software, but let us clearly explain to you exactly what it's worth to have the agility you need in the timeframe that you need it in. Last and most importantly, we are offering you the right kind of relationship, one committed solely to your success with both the people and products to back it up.
This is a good example of us selling extreme value, if belatedly. Everyone in our organization needs to be able to sell this. Marketing needs to market it. We will line up our references, provide unmatched validations, and dispel this mythical notion of good enough. If you want to survive today, there is no such thing.
I've also described the blurring line between infrastructure and applications. We're increasingly helping our customers build infrastructure applications using our platform and infrastructure application is a 21st century application and it has the following attributes. It's core like infrastructure. It involves exponential amounts of data, both data addressed and data in motion. It solves a business problem like an application, and it generally cuts across silos. It could be, and increasingly is hosted in the cloud, but it needn't necessarily be so. It is less about software as a service but rather software as a self-service. The range of these applications is broad, powerful and increasingly, a must have. They include offerings for big data analytics, master data management, enterprise social collaboration, fraud detection, real-time customer engagement, business process management, mobile payment processing and many more.
We're seeing a strong mind and growing opportunity to work with our clients for these types of applications.
In closing, I would say we will continue to innovate with new offerings. We will continue to protect and evolve our core franchise. We will continue in new areas such as cloud, social and mobile. We will get back to growth and more consistent execution and as always we will continue to manage our business responsibly and create shareholder value.
I will now turn it over to Murray.
Murray Rode - COO: Thanks Vivek. I'll start by reviewing some key operating metrics. In Q1 we had 104 deals over $100,000 in license revenue, up slightly from 102, one year ago. We had 12 deals over 1 million versus 20 a year ago, average deal size for deals of $100,000 or greater, was 652,000 versus 737,000 a year ago and 646,000 in Q4. Our top 10 customers comprised 21% of revenue, compared to 22% last year.
Looking at the geographic mix, total revenue was as follows, Americas at 54%, Europe Middle East Africa at 36% and Asia Pacific and Japan at 10%. In terms of our sales capacity. We ended Q1, up about 12 reps at 304 quota carrying heads.
Shifting to vertical markets; financial services comprised 22% of total revenue. Communications was 13%, life sciences was 9%, retail 7%, manufacturing 7%, energy 6%, and government and transportation and logistics were each just over 5%. Among the verticals some of the key year-over-year changes were as follows.
Finance was down 8% year-over-year, communications grew over 50%, life sciences grew 18%, and government was up about 8% over the last year. Insurance, media, CPG and healthcare all showed strong growth, but none individually reached 5% of total revenue in the quarter. So, we saw broad diversification in our vertical performance.
The breakdown of license revenue among our major product families was as follows; SOA and core infrastructure 45%, business optimization 47%, and process automation and collaboration 8%.
The core infrastructure and process automation categories were both down year-over-year, while business optimization was up continuing several quarters of strong growth and about equal contribution to license as that of SOA and core infrastructure this quarter, the optimization category continues to show its importance to event-driven platform story. The optimization category is also central to a big data value proposition, so its growth highlight our progress in that market opportunity.
So, looking at our results there are some key points to standout. First, if one looks at our deals stats in more detail, there was a big increase in the revenue contribution from deals between $100,000 and $1 million in license revenue and while deals over $1 million were down, we still had two deals over $5 million in the quarter which is strong for Q1.
The upside is that midsize deal activity improved year-over-year and even showed improvement over Q4 in terms of percentage growth and percentage revenue contribution. Closure of only a couple more of the larger deals in our pipeline would have put us into our license guidance range.
Second, the Americas infrastructure business is clearly not back on track quite yet, but we have made and continue to make good progress against our plans. Third, Europe after many quarters of outperforming the larger market did not meet expectations in the quarter and it's worth noting we had particular weakness in the U.K. and the overall performance of the division suffered as a result.
Fourth, our Asia-Pacific region showed strong growth at 27% year-over-year. Performance there was up across all three of our product license categories, again suggesting that execution was more the issue in other regions, not products. Fifth, despite the performance this quarter of SOA and core infrastructure, we continue to see a large and important market opportunity there and strong interest from our marketing efforts.
It's also important to remember that it along with process automation, correlate directly with infrastructure sales performance. So, a return to strength in the Americas should drive better SOA and core infrastructure sales. Also as we've said in the past, this category of product is very, very important to our broader platform capabilities.
Sixth, we also continue to see strong demand for our Professional Services, again being another positive indicator of demand overall for our offerings. Lastly, our pipeline continues to be strong. We did see a slightly lower than expected close rate in Q1. However the pipeline is there and it's large, so even a small improvement in the close rate materially impacts revenue performance.
In response to what we see in this quarter, we will continue with our plans to repair the Americas infrastructure sales organization, while continuing to fuel growth in key areas such as analytics, big data, event driven systems, cloud offerings and growing regions and verticals. As we navigate these changes, we also watch our investments and costs closely and not hesitate to eliminate costs or reduce investments where we are not getting the right return. We see a big opportunity and we clearly understand the need to capitalize on that opportunity on a consistent basis. All our effort as a management team are focused on returning to consistent performance.
I will now turn it over to Sydney.
Sydney Carey - EVP and CFO: Thank you, Murray. I'll begin by providing details on our financial performance in Q1 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 $237.8 million, license revenue was $78.3 million, services revenue was $159.5 million, non-GAAP gross margin for Q1 was 71.4%, non-GAAP operating income was 44 million, this resulted in an operating margin of 18.5%, non-GAAP EPS was $0.18 versus $0.20 a year ago. Q1 cash flow from operations totaled $63 million, up 54% from a year ago.
Deferred revenue, including both long and short-term components, totaled $276.8 million, up 13% from a year ago. On a sequential basis, total deferred decreased 4% due to a decrease in deferred license as it was recognized into revenue in Q1 partially offset by strong maintenance renewals in the quarter. DSOs for Q1 came in at 64 days versus 75 days a year ago. Also during the quarter, we spent $22 million in share repurchases.
As we look forward to Q2, we see strength in our pipeline with growth across all product groups. For Q2 guidance, I'm assuming similar close rates to what we experienced in Q1. I expect gross margins to be in line with the first quarter. Operating margins will continue to reflect our investments in sales capacity as well as other new growth initiatives, all which represent yet to be realized capacity. Q2 has three fewer days than Q1 and this is reflected in the total guidance.
For guidance, we expect total revenue to range from $242 million to $252 million. We expect license revenue to range from $78 million to $88 million. The non-GAAP operating margin is expected to be 18% to 20%. Non-GAAP EPS for the quarter should range between $0.17 and $0.19 with assumed tax rate of 25%. GAAP EPS should range from $0.03 to $0.06 with an assumed tax rate of 17%. Our actual GAAP and non-GAAP tax rates can vary depending on the mix of foreign versus domestic process.
With that, we'll be happy to take your questions.
Operator: Karl Keirstead, BMO Capital Markets.
Karl Keirstead - BMO Capital Markets: Address the issues of the demand backdrop obviously, with Oracle's miss yesterday, everyone's wondering about the demand environment, and they too talked about a sales execution issue. I just want to ask you, how comfortable you are with the execution issues having contributed to the license performance versus maybe something in the demand backdrop on the U.S. infrastructure software side?
Vivek Ranadive - Chairman and CEO: The reason that we believe that the demand is strong and growing, the appetite is strong and growing is because, firstly, there's pockets where there was great success and then there's other pockets where there wasn't; and we went back and saw just bad leadership and bad execution in those areas. Secondly, we look at the pipeline and the pipeline is strong as ever. So we saw that. Number three, even other things like we just look at things like the – we do a blog and from last quarter, we had, I think like a thousand people looking at it. Two months later or three months later, we have 20,000 people looking at it. So we look at other measures of that kind. So and there's parts of our business, the Business Optimization and the Big Data part, that is actually up 37% year-over-year. So we believe that if it was a question of a drop-off in every geography and every area then we would say, well maybe it's an issue that's more demand related, but we see that it's much more specific to geographies and areas.
Operator: John Difucci, JPMorgan.
John Difucci - JPMorgan: Vivek and Murray, you said there are handful of deals that slipped and if you would hit those to those deals they came in this quarter would look a lot different. Was there any particular vertical or region where this happened and can you know whether or not any those deals still closed yet?
Vivek Ranadive - Chairman and CEO: So, the central region is an example of an area, where things got out of hand and then there's been I know one or two deals that are pursuing that are -- that had slipped and unclosed, but Murray I let you talk more to that.
Murray Rode - COO: Well, just that I think it was more of a phenomenon in the Americas and in Europe, obviously less APJ given their performance and as Vivek says that there has been some of these that have closed after the fact.
Vivek Ranadive - Chairman and CEO: So the places where we have weak leadership there's been impact. So, even within Europe, Europe is generally good expect we don't have a good leadership in the U.K. right now that was the weak area and in the Americas same thing the places where we were not executing well with the ones that we saw negative results.
John Difucci - JPMorgan: And if I might a follow-up. This is more general sort of higher level broad question. I think can you give us any thoughts on sort of the potential for broader penetration of your product portfolio into your existing customers, because when we talk to customers and we talk to lot of them, it seems like really big opportunity here given what is generally a very positive review of TIBCO Technology the quality of TIBCO, but less awareness of really the breadth and depth of what you have to offer, I mean, I think that's true in the investor base, but surprisingly I think it is also true in the customer base. I know you've had some changes (and Matt is now) Chief Marketing Officer. Is there anything – I don't know, have you guys – is there anything you can do. First of all, it is my assessment do you think it is accurate and if so is there anything you are doing now to try to, I guess, get better penetration – broader penetration?
Vivek Ranadive - Chairman and CEO: You are 100% right. And so when we get story out to the customer, the customer ends up buying substantially the whole stack. We started doing that in geographies and in vertical markets. We are doing kind of it across the board attack on that issue. And so the example I gave where literally we've gone from 1,000 unique visitors on our blogs which get this message out to few months ago to 20,000 now. So, there is all kinds of metrics. The number of downloads of our products has gone up dramatically. So, we have effort and we need to do a lot better job of getting that message out. When we do get the message out then we are very successful with it. So, that's all the blocking and tackling that we need to be doing right now.
Murray Rode - COO: And we started too, John, with trying to address this problem in earnest last year as we have access with some of these – called the more digital channels like blogs and our website and access to products making that a lot easier. We are also doing it with much more targeted events into installed base and customer outreach to really get that story about the full platform out to the installed base.
John Difucci - JPMorgan: So, is it fair to say this sort of – there is an effort in process to try to, I guess, I don't know I guess it is marketing, right?
Murray Rode - COO: Absolutely.
Vivek Ranadive - Chairman and CEO: We are bigger company. We have as you say lots of customers and if we can get that message to even a fraction of them, then it becomes – we can translate that very quickly into lots of license revenue. The other thing, John, is that we just want to make it really easy to consume our intellectual property whatever shape or form that takes. So, some of the new things we're doing and those are all additive, they're not in place, but our cloud offerings tibbr is I think up 2 million users. Our cloud offerings are doing really well. So whatever it is, we just want to make it easy to get the message out, and then easy to consume the whole stack.
Operator: Kash Rangan, Merrill Lynch.
Kash Rangan - Merrill Lynch: It looks like SOA definitely had such a really good quarter. In fiscal '11, the business grew mid-teens. So obviously, you know how to execute an SOA. You've scored some really big deals against competition. My question is what has really changed about the sales execution and also Vivek and Murray, wondering if you can give us a quick update on how the new transition to North America sales leadership is happening as we speak and also related to this – it's a string of some questions, but all really aimed at SOA. If you can talk to the pipeline, the win rate when you do go hand-to-hand combat against your large competitors, what kind of win rate are you seeing, and at this point, are you still looking to add sales capacity or are you looking to get the best out of what you have before you add more?
Vivek Ranadive - Chairman and CEO: So Kash, I think you're absolutely right that we've had great success in SOA and now we saw 37% uptick in the big data business optimization sector, and so, actually, we did get the competitors, they kind of shifted the game the last three to six months and our sales people have not made that shift. So, it used to be that, it used to be a flat out technical battle, and we would win that battle hands down and then we would win the deal. So, what I saw increasingly happening is that they now concede that ground very quickly, and they basically have shifted the battle from the technology to basically saying, hey we're good enough, but let's look at the business model and let's look at the relationship and with incumbents. So we actually lost, but that I was personally involved with Novera, there were a couple of biggest deals that we lost because we won the evaluation unanimously and then they shifted the battle to – it's good enough, what we have is good enough. So in one case, we just plainly lost it, we didn't do anything about it. In the other case, our sales guys went back and then battled it and said hey, look you know, good enough isn't, and you really need this because otherwise you won't be able to do these kinds of things and sure, given enough time and money you can strap the moon to the earth, but you don't have that kind of time and money. So we were able to, in the case of the hospitality leisure company, we were able to reverse that and go back and win the deal and then after the quarter closed, we closed the seven figure deal. So, the competition has actually kind of changed the game on us and there's parts of our sales organization that are good at dealing with this and there's other parts that are less good. Now, I feel very confident that with the new leadership under Raj Verma that we're being very systematic about how we approach this and I fully expect that we will once again show that the differentiation with the whole SOA thing. In terms of the sales capacity, we feel that we really need to train people and get them ready for this new type of battle with the capacity that we have right now. So, and Murray, I will let you add to if there's any parts of the question I missed.
Murray Rode - COO: I think you covered most of it. Perhaps the only thing I'd add is some of what when Vivek talks about the new leadership in the Americas, part of that involves is focusing more on the segments of the platform to see better attention to these -- the core areas of the platform and we see better results, when we get sales force focused on particular segments. I think the other thing is if you look at the -- as you point out kind of past trends with SOA, it has grown well in past, when we started to have any issues really in the Americas is in retrospect where we see some of the falloff and SOA start to happen. So, again, as I said in my prepared remarks as we start to see repair on Americas infrastructure sales, we think that that's going to correlate pretty strong with SOA performance.
Kash Rangan - Merrill Lynch: If I could slipped on in. Have you been through similar transition point in your history and can give us some feel for how you worked through this from a competitive positioning standpoint that we can get more comfort, that you can get through this, that's it for me?
Vivek Ranadive - Chairman and CEO: Kash that's great question. So we've actually been through several points in our history and we kind of grow and people then -- people said it's there market integration and we had to kind of go get the message out and yeah, there is a market integration of boom, grow, grow and grow and then wait a minute there is like 10 players and it's hard to distinguish if you guys are going to win and the other guys are like, giving it away and you're charging for it, so how do we know that you're going to win that battle. So we were battling with the little guys and then we kind of battled out and we just missed all of them and we won that battle and then grow, grow, and grow again. Then we -- basically are with us and the big guys, and the big guys are like, hey, we're bigger we're better and (let's do this) and we proved that we could beat them, and we beat them and we beat them. Then we go, go, go. And then now what has happened is that there is only like three of these guys, and particularly two of them have basically given up competing on technology. So, now they are saying look they will just say okay it is good enough. So, we've been through this several times and we feel very, very confident of that and we have evidence of beating them all the time. And so we've had this battle to fight. So, there is any number of accounts where we can give examples of that. In some instances, like in the case of a Canadian bank where they actually won based on the business model and the relationship, in that case it was IBM and then it didn't work and then they called us back in. So, it is battle we have fight. We have to arm our people. Give them the right training and right materials and the right positioning and we feel very good that we're going to do that. But it is not done till it is done. Murray, do you want to add anything?
Murray Rode - COO: No, I think that point is not done till it is done.
Vivek Ranadive - Chairman and CEO: But we have lots of evidence of success.
Murray Rode - COO: Yeah.
Operator: Brent Thill, UBS.
Unidentified Analyst - UBS: (indiscernible) on behalf of Brent. I am just wondering there is more color on which specific product saw strengths versus products that were weaker within SOA and the BPM segments?
Vivek Ranadive - Chairman and CEO: So, SOA as a category really was a bit soft across the Board. Couple of better elements within SOA were the (BPM) segments, the B2B section. Against some of our connectivity products for business-to-business integration, those are probably the bright spots around SOA. BPM was a little off. We've seen a lot of strength with the ActiveMatrix BPM product in BPM through last year, and I think that left it with a little harder quarter in terms of Q1, but again, we continue to feel like particularly, the ActiveMatrix BPM product has a lot of market opportunity.
Vivek Ranadive - Chairman and CEO: Also, the analysts are all saying that, right. So, basically the analysts are saying that arguably one of the strongest areas of growth looking out over the next two or three years is in fact SOA, BPM integration.
Murray Rode - COO: Then of course on the business optimization category, we talked about it already, but that overall was – really everything within that category had a good quarter. So, Spotfire, BusinessEvents, all the products in that category did well.
Operator: Greg Dunham, Goldman Sachs.
Greg Dunham - Goldman Sachs: I'm going to do one more on SOA and really just trying to get a better handle on what are the biggest drivers to some of the weakness in that business, and I was under the impression that some legacy products, sunsetting and declining was some of the issue when you look back to last year, but how do you rank the impact of older product falling off? Whether you're now talking about kind of more competitive price competition and it's sounds like from some of your competitors and then maybe the attrition in the sales force following the management changes, last year in the Americas business. Which one of these factors is really driving the slowdown?
Vivek Ranadive - Chairman and CEO: Yeah, I think the two are related, it's a lack of quality execution, because as I said earlier to Kash's question, that we win hands down on the technical evaluation, but IBM and Oracle, the two biggest competitors, they say that hey look, what we have is good enough and that's all you need, and so, if we don't have quality representation in the field then they're not able to make the case for why the differentiation is essential, and that is the number one reason for the lack of expected success in those areas. I think that, I don't know – Murray do you want to add to that or…?
Murray Rode - COO: No, I think that's the point that it's not just one factor that we're talking about. This notion of lack of quality execution and that really showing up in the Americas in the second half of last year, clearly had an impact on this category for a lot of that, sales organization selling SOAs is pretty core to what they sell? I think if you look at the products within, yes there are – that is getting to be a bigger category and so it has more products in it and some products are less growth drivers. We talked in Q4 about the fact that within SOA if you looked within that category the core leading components of it are active matrix platform, those products really did quite well through Q4 had some weakness unfortunately in Q1 but I think the trend there through 2012 was still pretty good, despite those sales execution issues we talked about.
Operator: Raimo Lenschow, Barclays Capital.
Raimo Lenschow - Barclays Capital: Quick one. Just briefly if I'm still trying to add this up, so if I look at the guidance for license revenue that's at the midpoint about minus 10%, but you still then talk about kind of deals that slipped and came into the quarter. So, can you talk a little bit about the close rate assumptions, because minus 10 is worse than a minus 5% just for now? And just maybe any update last quarter you talked about expanding the field sales force on tibbr, just talk a little bit about the opportunity you see here and how excited you are about the expanded sales opportunity?
Vivek Ranadive - Chairman and CEO: So, we are very, very excited about the opportunity in the appetite, there are like I said pockets of business they grow 37% and so on. But we're also just being cautious. We know that we need to retrain our sales force. I think when you have the technology differentiation we had and it's an easy sell, and that mask a lot of evil and then when the competition shifts the base something different then you got to be agile and nimble and you got to be able to compete, and so we are seeing just seeing conservative I don't think, hey, we are rolling up our sleeves and we are going battle led out and we are going to win all these deals. And we are at the same time changing players in the U.S., we're letting let go some people and bringing in new people, and so there is a transition that we are going through. We feel and -- then we are also doing new things and some of those news have great future potential, but they could be cloud or time-based deals and those things are the things we need to keep investing. So we look at all of that, and we just want to be conservative. We don't want to come back. We just want to start, get back on the winning streak again.
Sydney Carey - EVP and CFO: So just, even more specific into the close rates, we're assuming similar close rates to what we experienced in Q1, but those are fairly down from what we saw last year. So again, just even slight improvements in the close rates will have a material impact on the revenue. So, again, we did see a little bit of a downtick from Q4 and Q1 and we're using that same assumption.
Murray Rode - COO: I think the only other thing to point out here is, is from our perspective, it seems more rational if you will to look in this case at the sequential movement than to look back at last year. I think we know what we did in Q1. That's the most recent data point and I think it's just rational and kind of conservative to use that as the base line going into Q2.
Operator: Derrick Wood, Susquehanna International Group.
Derrick Wood - Susquehanna International Group: A couple of questions for Vivek, you mentioned that you don't have the right leadership in the U.K. right now, is there a change going on there and can you just update us with what the plan is there?
Vivek Ranadive - Chairman and CEO: Yeah, we're looking – we actually don't have anyone there right now. So we're looking at different possibilities, and Murray, do you have more of an update beyond that?
Murray Rode - COO: At this stage, no. As Vivek says, we are looking to fill that role. We do have some ideas already in mind. It is a priority for us to get someone into that position. It has been and we expect it to be going forward an important region for us.
Vivek Ranadive - Chairman and CEO: Yeah, and we have some interim plans while we find a long-term solutions for that.
Derrick Wood - Susquehanna International Group: Would you put some of the weakness in the U.K. as a result of some of the management changes there?
Vivek Ranadive - Chairman and CEO: Yeah. Absolutely, and again Europe has been strong for us. The area that was weak was the U.K. area and that was – basically we did not have leadership over there.
Derrick Wood - Susquehanna International Group: Then other question, Vivek, you mentioned that the infrastructure products are critical to the entire portfolio and to the strategic growth products, but we are clearly seeing a pretty big divergence in growth between the two. So, I'm curious what kind of gives you the evidence that there are synergies between both the integration and the optimization products?
Vivek Ranadive - Chairman and CEO: Well, I think, I'll actually answer part of that first. Remember for us a core part of our value prop is that when we talk about analytics or we talk about complex event processing and how these products work. There is this platform – this integration platform behind it that makes those products easier to use. So, even though they may become the leading edge of a sale or even the predominant portion of the software that a customer buys that vision of the platform is an important part of what makes buying from TIBCO valuable.
Murray Rode - COO: Yeah. So, basically if you want to do visualization then you still have to bring the data from somewhere. So, if you have the platform, that brings the data, and then you don't want to just look at stale data, you also want to look at live data. So then again, the TIBCO platform becomes applicable. So just integration, real time, moving things, transforming them, all the things that you think of integration are very much key for the platform, because the customer is going to have to do all those things in some shape or form anyways.
Derrick Wood - Susquehanna International Group: Last question, on the Spotfire business obviously look like it did well. Are you in your guidance expecting that kind of 30%-ish growth to continue?
Murray Rode - COO: We continue to think Spotfire is a growth product for us, yes and really the whole business optimization category.
Operator: Brad Zelnick, Macquarie Securities.
Brad Zelnick - Macquarie Securities: Murray, I'm hoping to dive a little deeper into the sales execution issues. As I'm trying to understand, how you define good execution and how long do you think it takes to get there? I appreciate the confidence in Raj Verma and why it made sense to put in a new leader in North America. But can you talk about what's happening from the perspectives of people, processes and technology and what remains to be done?
Murray Rode - COO: Sure. So as we talked about coming off Q4, a critical part of this is getting the right leadership. I think there is two other pieces in broad terms; second piece is the approach, the methodology, the process, that you enforce in a disciplined fashion across the organization. Raj has started to update those processes, that methodology to ensure that it's consistently applied. And then the third piece is really measuring performance as you go along and adjusting your strategy based on the feedback that you are getting. So I think we feel like we are well into the addressing the people issues and getting the right leaders, not just Raj, but leaders beneath him, sorted and any changes that we need to make. Raj is also well into implementing some of those changes in terms of process and behavior and discipline. So, as we said coming out of Q2, we said changes like this are one to two quarter kind of thing usually. Clearly, we didn't complete all of that coming through Q1. But again, we feel like we are well into the process.
Brad Zelnick - Macquarie Securities: Just to follow-up on that Murray, I mean, we've been talking about that since last June, when Robin departed. Can you just maybe help us understand against that one to two quarters, how far are we into the one to two quarters? I mean, do you have confidence that you are there or is this still maybe another one to two quarters?
Murray Rode - COO: Well, it's clearly one more quarter at least, and I think that our – again, as we said in response to something else, you're not – you're really not done until you're done, and there is some latitude that we have to leave ourselves, that if we feel like we need to make more changes as we go along for the long-term, we're going to that. But we do feel like we are starting Q2 in a better position, a much better position really than we started Q1.
Brad Zelnick - Macquarie Securities: If I could sneak one last one in for Sydney. Sydney, can you just tell us all way the deferred license balance finished at the end of the quarter?
Sydney Carey - EVP and CFO: We did see, as expected some deferred rollout of license deferred and into revenue, but I really can't be more specific than that.
Operator: Rick Sherlund, Nomura.
Rick Sherlund - Nomura: I'm just curious, what's changed in the market? Why are we having such execution issues over the past year? Was there some change in the environment, the competition, the market that's – kind of surfaced the issues of sales execution across the globe?
Vivek Ranadive - Chairman and CEO: Rick, it's not really across the globe and so there were areas where we performed well, even against the backdrop of difficult economic situation. So, if you look across Asia and Europe and many parts of the Americas, we performed well and even in the Americas we performed well in parts of the business like the big data business optimization business which is up substantially, so really it's in our – it's areas like the U.K., Northern Europe, where we don't have leadership, it's the Americas where we made a change and now we're having to go through and put new leadership and do the training and so, again, it's pockets where we were not executing well. So, that's one element of it and then the other element of it is what I've been saying all along that the competition which is mostly the big guys, IBM, Oracle, they've conceded that they don't have the technology as good as ours and so they've shifted their message to saying what we have is good enough and it's all about the business model and the relationship in the incumbency. And so we have people who are good at fighting that and proving that it's not good enough and then because we have such technical superiority and we were winning easily, I think lot of the people just didn't – they've got lazy basically and didn't adjust, when those competitors shifted their messages. So, that's what you are seeing. So, it's a combination of certain territories not executing and then competition indeed shifting the battleground.
Rick Sherlund - Nomura: And this issue of the government sequester, which kind of coincided with end to your quarter, it look like government maybe do better this quarter, I'm not sure on the federal government any observations on that?
Vivek Ranadive - Chairman and CEO: Again, I wouldn't quote our – I don't and the only person I can blame is myself. We didn't have good execution in that sector. And so, I can't really blame anything else other than my own execution. I mean I can't tell you that because of sequestration these eight deals got delayed and we did everything right that's not the case.
Operator: Mark Murphy, Piper Jaffray.
Mark Murphy - Piper Jaffray: As wondering if you could update us on your sales hiring plans, your targets for year-end, and maybe wondering if you have any inclination to tap the breaks a little just given variance in the close rates.
Sydney Carey - EVP and CFO: We ended the quarter at 204 quota carrying heads and we set a major target of about 310. We kind of like where we are at, we are okay, if we see that increase to decrease some. We're going to continue to add in certain geos and product groups as we see the need to do that. But right now, we're really focused in on training and process and execution.
Mark Murphy - Piper Jaffray: Any thoughts on where it could be by year-end?
Sydney Carey - EVP and CFO: Right now we're only looking through mid-year at this point. Vivek?
Vivek Ranadive - Chairman and CEO: One thing I do want to add is, and it was left unsaid is our Cloud and tibbr and hosted businesses are growing very rapidly. So we're actually – we have added quite a few salespeople in those areas, and that's delivering great results. But again it's – those things are time based revenues. So it doesn't have the immediate impact that the one-time license sales have.
Sydney Carey - EVP and CFO: In addition to that, we look at those resources in our quota carrying heads, but any of the revenues that they generate that's hosted will actually sharpen our services line so, just as a footnote there.
Mark Murphy - Piper Jaffray: Then Vivek, in addition, just observing in recent months, it's pretty difficult to identify any on-premise software companies that are reporting stronger results, and really the vast majority have been disappointing and it includes organizations like VMware and Oracle and TIBCO and really, many, many others. It's a little perplexing to see multiple companies simultaneously pointing the finger at their own sales execution. So, I'm just wondering what is it that gives you the confidence that we're not seeing something else in terms of just a shift in buying preference to public cloud architectures for various applications and also for the infrastructure that runs underneath them.
Vivek Ranadive - Chairman and CEO: No, I think you've got to remember that some of those companies, the small ones, they have – their revenues are smaller, so it's easier to grow up smaller revenues, but without the question the world is shifting into the cloud, but the biggest beneficiary of that is us, because when you introduce yet another variable into the equation then that means more integration. That's why the analysts are all saying that integration is one of the strongest categories of enterprise spending. So, we're actually beneficiaries of that and we have a lot of cloud offerings and we have a lot of ways that we help you to get into the cloud, and we also allow you to integrate between the cloud and cloud and premise and everything else. So, (Enter P) is our friend, so you introduce something new and it's yet something else to integrate with. So, our – but there is also the direct evidence which is the pipeline is very big and very good and as good as we've seen. We have as I've said when we put out our blog we've got like 1,000 people looking at in a week or something to over 20,000 and that was just a couple of months ago and then we look at the downloads we're getting. So, we're seeing all kinds of evidence. We're seeing that in the pipeline. We're seeing in our services business. We're seeing in certain geographies. So, I think there is a shift away from the old data base architectures and I've been talking about that for some time and there is a move to kind of in memories, there is a move to real-time, there is a move to cloud. So, we think we're right in the middle of all of that.
Brad Zelnick - Macquarie Securities: One last one Vivek I think you had also commented that you said, we went back and saw a bad leadership and bad execution in certain areas. I guess I'm just wondering can you provide an example of how do you identify and maybe isolate what the bad behavior is, is it slowness responding to RFPs, is it something else that you identified?
Vivek Ranadive - Chairman and CEO: Well, Is it something else that you identified?
Vivek Ranadive - Chairman and CEO: It is at all levels, so it is being (indiscernible) customer was very happy and then going in and finding out that the customer doesn't have a clue that we do these four other things. So, there is that or not having the requisite expertise in a certain office in certain product categories or not getting – in some cases I am embarrassed to say people not even being in the office and so there is all kinds of things that I can point to where literally there is we had such widened leadership. Murray, you wanted to add to that?
Murray Rode - COO: Well, it is not staying in touch with the customer continuously over time. A lot of our business comes from repeat purchases from customers, so you need to keep up that relationship. It is giving up too quickly on a deal in a competitive situation and it is simple things like not listening to what the customer is telling us as the deal cycle progresses. So, you start to misjudge where you really stand and where you are hitting and missing in terms of meeting expectations with customers.
Vivek Ranadive - Chairman and CEO: Yeah, it has been too easy to just win technically and then the sales people get lazy because they get technical superiority and we win that 10 out of 10 times and unanimously. And then you just assume that you are going to get the deal and so don't really do the hard work that you have to do because the competition is not just sitting there they know they've lost technically so they are trying to compete on other ways. So, it is all of those things. Not having precision in terms of what's going on where, who is doing what, where it isn't the cycle, what we need to do. I can go on and on and on all day but it is just basic blocking and tackling.
Operator: Matthew Hedberg, RBC Capital Markets.
Matthew Hedberg - RBC Capital Markets: I'm wondering on the linearity in the quarter was 64 days. Did trends decelerate or I think kind of walk us through the linearity of the quarter?
Sydney Carey - EVP and CFO: Well, we did have some deals that we talked about flipping from Q4 into Q1 and we saw some of those closed. But we have that every quarter, so I would say that we saw pretty normal linearity (going on for us); and like any enterprise software company, we do end up closing quite a bit in the last month and last few weeks.
Matthew Hedberg - RBC Capital Markets: Then Sydney, maybe as a follow-up to your license guidance. How dependent is the low end of the range on outsized deals?
Sydney Carey - EVP and CFO: Well, again, we look at the pipelines. We are doing inspection as to what's in the pipelines and the risk around that and coverage. We look at the larger deals and we put a bigger spotlight on those, so we look at that at the lower end of the range.
Operator: We have now reached the end of the allotted time for questions. Mr. Ranadive, do you have any closing remarks.
Vivek Ranadive - Chairman and CEO: Yeah. We'll now conclude this call, and thank you all for joining us, and have a good day.
Operator: Thank you for joining us. We will now conclude TIBCO's Q1 2013 earnings call.