Asure Software Inc (ASUR) 2007 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2007 Forgent earnings conference call.

At this time all participants are in a listen-only mode and we will conduct a question-and-answer session towards the end of the conference.

I would now like to turn the call over to Miss Lisa Gunter of Forgent Networks.

Please proceed.

Thank you.

Welcome, everybody, to Forgent's conference call.

Before we start I would 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 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 express permission; and your participation implies consent to the calls recordings.

After we have completed our review of the quarter will open up the call for questions from the financial analyst community.

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

Thank you, Lisa, and good morning, everyone.

Welcome to our conference call.

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

We will both give you some of our thoughts and analyses on the quarter and then we will answer some questions from you as well.

We had a good performance in Q2 with continued progress in a number of areas.

We achieved profitability for the second consecutive quarter.

We grew cash over 20% over the period, prior period and we held our expenses essentially flat while making modest investments in both IP and the NetSimplicity software business.

We continued to focus on enforcement of the 746 patent, relating to computer-controlled video systems and remain on schedule for a jury trial in May 2007.

We also grew the NetSimplicity business 86% year-over-year which indicates that this can be a strong performing business in the future.

I mentioned to you on the last call that our mission is to maximize the value of our intellectual property while growing our software business to be profitable growth engine for the future.

Let me make some comments specifically on intellectual property.

We have a very clear focus this quarter on doing everything under our control to license the 746 patent to companies using the technology or to be well prepared to take the case to trial in May.

As you may recall the 746 relates to computer-controlled video systems where 10 million units are in use today and the industry experts see accelerating growth to 100 million users as home entertainment grows over the next few years.

Forgent is in litigation with 12 defendants in the Eastern district of Texas.

We received the claims construction ruling from the court on February 16th.

This is a very important milestone and clearly indicates that the case is moving to trial and remains on schedule for May, just a few months away.

There are a flurry of motions by the defendants pending and we will continue to provide as much information as we can through the link on the our web site to [Pacer] which details the rulings by the court.

I might also mentioned that the court has ordered another round of mediation on this case to be completed before April 15th.

Now let me turn to NetSimplicity.

We are pleased with the continued strong performance of the NetSimplicity business in Q2.

This has historically been a challenging quarter from a seasonality perspective yet we grew revenue 6% quarter-over-quarter.

We believe that the growth we experienced in the software segment was due to a number of contributing factors including our continued success in selling to larger organizations.

One of the primary reasons for growth again this quarter were strong sales of our enterprise package with a new outlook integrations features in reduced in MRM7 we have succeeded in selling to larger accounts, while simultaneously continuing to serve the small to medium business sector.

In addition, the fourth consecutive quarter the average selling price of Meeting Room Manager increased also due to increased demand for our enterprise feature set.

We plan to continue to target and further penetrate this segment in coming quarters through a focused effort on sales and marketing and also through new product enhancements that will be delivered through our next version of MRM 7.5 this quarter.

We also saw a continued strong performance from our Visual Asset Manager management product in Q2.

We delivered a new release of the product and are currently planning significant functional enhancements to the released this summer.

With the asset management sized by Gartner at a $0.5 billion, we believe that the VAM product represents a great growth opportunity for Forgent NetSimplicity.

Finally we continue to be pleased with customer adoption of MRM on demand offering.

Our number of on demand customers increased 10% quarter on quarter and with this growing number of subscriptions, we see a continued solid growth of our deferred revenue stream.

Our goal in the software segment as stated on our last earnings call is to make modest investments in sales, marketing and development so that we can continue to build a solid and profitable core business for the future.

Now let me turn it over to Jay for some details on the financials.

This morning, I will discuss the financial highlights from this past quarter or our intellectual property business and our NetSimplicity software business.

In addition, I will discuss the increase in the strength of our balance sheet and working capital and my final comments will relate to high-level guidance for the future.

First off, intellectual property.

The significant event for this past quarter for intellectual property was the sale of certain patents to [Tanberg] for $3.15 million.

In addition to the initial cash we received of $2.9 million, we also have $250,000 in a two-year escrow for normal representations and warranties.

Note that this sale was accounted for as other income versus topline revenue in that we are not in the business of selling patents.

Intellectual property operating expenses amounted to $940,000 this past quarter, a 7% increase over last quarter.

This planned increase was due primarily to spending on litigation related to the upcoming May trial.

Let me turn to NetSimplicity.

Our software revenues increased this past quarter as Dick said by 6% to over $1 million.

This revenue performance is up 86% over the corresponding period one year ago.

This was the fourth consecutive quarter that we grew the software business.

In addition to growing revenue, we also grew both software backlog and licensed average selling prices from prior quarter's level.

And since we acquired this business, we nearly have tripled our licensed average selling prices.

Margins for NetSimplicity were approximately 81%, up 13 percentage points over the previous quarter.

This was the first quarter where we were able to break the 80% mark and we are forecasting our software margins to be in this approximate range on a go forward basis.

Operating expenses for NetSimplicity were approximately $980,000, a 4% increase over the prior quarter.

This planned spending increase was due to additional investments in sales and development headcount and investments in both marketing programs and marketing headcount.

This last quarter we invested approximately $100,000 in cash in NetSimplicity and, on a stand-alone P&L basis, this business came the closest ever to breaking even.

Total operating expenses for Forgent grew by approximately 2% for the quarter and we increased our total headcount by 2 to a total of 38.

Bottom-line earnings we are profitable for the second consecutive quarter and earnings amounted to $0.05 a share versus $0.11 a share in the prior quarter.

And year-to-date, our earnings, bottom-line earnings, have totaled approximately $4 million.

Let me turn to balance sheet and liquidity.

Our cash balance increased by 20% to $18 million and this is the highest level in the past two years.

Note that our working capital grew by $1 million to $5.1 million.

This is the largest working capital balance since third quarter '05.

Our DSO this past quarter improved to 55 days due to the collection of the final 672 patent settlement receivables.

And one other note, our current ratio was 4.9 this last quarter, an improvement over last quarters 2.9.

Let me turn to guidance, please.

I would like to provide guidance in five areas this quarter.

First off, we believe we will achieve IP license revenue between now and the end of this fiscal year; and as in the past predicting the exact timing in magnitude of IP revenue remains a very difficult task.

No. 2, we are planning to increase spending in intellectual property between now and the trial.

And No. 3, we will continue to make prudent investments in our NetSimplicity software business and we believe this business will continue to grow for Forgent.

We are forecasting that we will maintain healthy cash balances and working capital for the foreseeable future, and No. 5, we are forecasting to be net income profitable for this current fiscal year.

I would now like to turn the call back over to Richard Snyder.

What I would like to do is just give you three summary points to take away from the call.

No. 1, I believe we are financially healthy with a good balance sheet, control over our expenses.

No. 2, we continue to believe the 746 patent is valid and enforceable.

We are pleased with the progress of the case and looked forward to getting to trial in May.

And No. 3, NetSimplicity continues a strong performance and offers attractive growth for the future.

Thank you and now we will take some of your questions.

(OPERATOR INSTRUCTIONS) Richard West with Forgent.

This is Richard West.

I'm with Dutton Associates.

I'm not with Forgent. (MULTIPLE SPEAKERS) Nice quarter, guys.

I have a question.

I know that the court sort of looked at the public patent re-examination and didn't stop any trial or extend the -- what is the status with the public patent foundation at this point?

The status with the public patent foundation is we have responded to their inquiry, Richard.

Nothing else has really developed from that.

I might mention that the other -- the action, the re-examine with the patent office we have responded as of, I guess, about a week ago.

We submitted our response to the defendants' re-examine claim and now it will be a process of going through and working with the examiner to determine the facts in the case.

All right.

Thank you.

(OPERATOR INSTRUCTIONS).

At this time, there are no further questions in the queue.

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

This concludes the presentation.

Thank you and have a great day.

You may now disconnect.

Have a great day.