Asure Software Inc (ASUR) 2005 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the fourth-quarter Forgent earnings conference call.

My name is Jen and I will be your coordinator for today.

At this time all participants are in listen-only mode.

We will be facilitating a question-and-answer session towards the end of today's presentation. (OPERATOR INSTRUCTIONS).

I would now like to turn the presentation over to your host for today's conference, Mr. Michael Noonan, Senior Director of IR.

Please proceed, sir.

Thank you, Jen and welcome, everybody to Forgent's conference call.

Before we start, I'd like to mention that some of the statements made by management during this call might include projections, estimates and other forward-looking information.

This will include any discussion of the company's business outlook.

These particular forward-looking statements and all of the statements that may be made on this call that are not historical facts are subject to a number of risks and uncertainties that could affect their outcome.

You are urged to consider the risk factors relating to the company's business contained in our latest periodic reports on file with the Securities and Exchange Commission.

These risk factors are important and they could cause actual results to differ materially.

This call is also being recorded on behalf of Forgent and is copyrighted material.

It cannot be recorded or rebroadcast without the company's expressed permission and your participation implies consent to the call's recording.

So after we've completed our review of the quarter, we'll open up the call for questions from the financial analyst community.

I would like to now turn the call over to Richard Snyder, Chairman and Chief Executive Officer of Forgent Networks.

Richard.

Thank you, Michael.

Good morning and thank you for attending Forgent's 2005 fiscal fourth-quarter conference call.

With me this morning is Jay Peterson, who is Vice President and Chief Financial Officer.

As customary on these calls, I will comment on our results and then have Jay give you some more details around the numbers and then we will open this up for your questions.

Our focus in the fourth quarter continued to be on intellectual property.

I have spoken in the past about expanding this program beyond our '672 Patent and we did that by asserting the '746, or DVR, Patent.

Next, we continued to work on the litigation process for the '672 Patent and I believe we have made some significant progress.

We have been assigned a new judge and we have a case management conference scheduled in a few weeks.

On another note, we continued to work on our expense structure and significantly reduced costs by more efficiently managing our legal teams.

Last but certainly not least, our other business, NetSimplicity software, grew by a healthy margin as well as releasing new and enhanced products.

So let me do a quick overview of the financial results for the quarter, an overview of the intellectual property program to date and then finish with some comments about the software business.

Under financial results, we generated about 900K in total for the quarter.

While I believe this could be considerably higher, I recognize that the court procedural delays with the '672 Patent litigation will affect settlements and that such delays appear to be normal for the size and scope of this case.

We are looking forward to the outcome of the case management conference to be held in a few weeks where we anticipate greater clarity of the dates and details that the court can assign.

We almost doubled the revenues from NetSimplicity software on a year-to-year basis and we had double-digit reduction in operating costs and maintained a healthy cash balance for the quarter.

Now let me talk a little bit more specifically about intellectual property.

We initiated litigation against 15 companies for infringement of our '746, or DVR, Patent in Marshall, Texas after some initial licensing discussions were unproductive.

Defendants have answered our complaint and those details are posted on our website.

The next step is to get a scheduling order and then to move towards trial.

With respect to the '672 Patent litigation, Judge Fogel, of the United States Court for the northern district of California, the San Jose division, will be hearing the case.

On the Microsoft front, their case has also been referred to Judge Fogel.

The Markman hearing, set for February 13, 2006, is still in place.

However, a new case management conference with Judge Fogel, which is scheduled on October 3rd of 2005, will give us more clarity.

We expect to get more clarity on the proceedings, the timetable and a trial date in the near future.

In terms of licensing, we did 300K in the fourth quarter of '05.

As mentioned, settlement discussions can be influenced by delays but we will continue to seek these licensing opportunities.

On the software side, let me comment briefly on some of the results here.

NetSimplicity continues to improve with a growth of 26% quarter-to-quarter and almost 100% year-over-year.

We're seeing healthy margins and approaching breakeven and generating cash.

We also started out the new fiscal year with a very strong August.

As you can imagine, we're very happy with these results to date.

We have added some new products and updates all within the existing budget and current headcount at a pace that we can afford.

Now let me turn the call over to Jay for some specifics on the financials.

Thank you, Dick.

I would like to discuss the highlights of our financial performance from this past quarter, including revenue margins, the significant reduction in our operating expenses, briefly discuss the income statement, our balance sheet and liquidity and then I will conclude the discussion with high-level guidance for the future.

First off, revenue.

Total revenue decreased to approximately $900,000 for the quarter due to reduced intellectual property revenues.

This past quarter we signed eight intellectual property licenses bringing the total for the program to 46 licenses.

NetSimplicity software revenues and bookings grew this past quarter to approximately $600,000 and we expect that business to continue to grow in the future.

NetSimplicity revenues grew 26% over the prior quarter and nearly 100% year-over-year.

In addition, our software business grew eight AFPs (ph).

License count, backlog and bookings grew 28%.

Also we are planning for NetSimplicity to generate cash in the first calendar quarter of 2006.

Note that this last fiscal quarter we invested approximately $140,000 into that business and that required investment will decline this quarter.

In terms of gross margins, our overall IP gross margins were negative due to the $600,000 retainer that we paid to Godwin Gruber for '672 legal services.

We improved our software margins to 70% this past quarter and we believe that software margin performance will be at or near this percentage performance in the future.

Let me turn to operating expenses.

Our overall operating expenses declined by 33% this past quarter driving the $1.4 million reduction for the following; lower FTC-related expenses, a reduction in the '672 trial preparation expenses and the successful completion of the Gordon Matthews trial.

Our current headcount is at 29 full-time employees, flat with the prior quarter.

The distribution of those individuals is as follows; 21 are involved with our NetSimplicity software business and 8 in general and administrative and intellectual property split approximately 50/50 between those two last groups.

In terms of the income statement, we have discussed in the past the inherent peaks and valleys in intellectual property licensing revenues and the associated direct impact on our profitability.

This last quarter we were not able to achieve profitability due to the reduced levels of intellectual property revenues.

Our balance sheet and working capital remains strong.

This past quarter, our cash and securities balance ended at $17.3 million.

Our current ratio of 4.0 was essentially flat with the prior quarter and working capital ended at 13.5 million, down from last quarter's level of 15.9 million.

The last topic I'd like to discuss is some high-level guidance and I would like to provide guidance in four different specific areas.

First off, we will achieve IP license revenue this current quarter and throughout fiscal year 2006.

As in the past, predicting the exact timing and magnitude of IP revenue remains a difficult task.

We will continue to diligently manage our operating expenses and we are committed to reducing and eliminating expenses in non-essential areas.

Also we are planning on expenses to remain relatively flat this quarter say somewhere in the range of plus or minus 5 to 10%.

We believe that the NetSimplicity business will continue to grow and we will need to generate bookings in the range of 800,000 to $850,000 in order for NetSimplicity to generate cash.

And last point, as stated previously, given our understanding of the litigation timeline, we believe that we have more than enough cash to fund all of our operations, including the cost of litigation between now and when we ultimately get in front of a jury.

I would now like to turn the call back over to Michael Noonan.

Thank you, gentlemen and with that I would like to open up the meeting for questions from the financial analyst community and I will ask Jen to coordinate the session.

(OPERATOR INSTRUCTIONS).

Gentlemen, you have no questions at this time.

I would now like to turn the presentation back to Michael Noonan for closing remarks.

Thanks, Jen and it appears we have done a great job at disclosing all the information for the quarter.

We appreciate everybody listening to the call.

If you have any follow-up questions, everybody knows my numbers and we will be talking to you soon.

Thanks for listening and we will see you next quarter.

Bye now.

Ladies and gentlemen, thank you for your participation in today's conference.

This concludes the presentation and you may now disconnect.

Have a great day.