諾基亞 (NOK) 2003 Q1 法說會逐字稿

Good afternoon. My name is Linda, and I will be your conference facilitator today.

At this time, I would like to welcome everyone to the Pumatech earnings call, first quarter 2003. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key.

Thank you. Mr. Kitchen, you may begin your conference.

Welcome to our fiscal Q1 2003 earnings conference call. I will begin by reviewing our Safe Harbor language and recapping our Q1 financial results before I turn the call over to our President and CEO, Woody Hobbs. After Woody's comments, I will end the call by updating our financial guidance before opening up the call for Q&A.

As a reminder, this conference call may contain forward-looking statements, the risks of which are the same as those described in the Safe Harbor language in the press release and those detailed in the company's SEC filings. Actual results may differ materially from those described during the call. All forward-looking statements are made as of today, and Pumatech disclaims any duty to update such statements.

Revenue for our first fiscal quarter of 2003 was approximately $5 million, up about 13.8 percent from the 4.4 million we reported last fiscal quarter and down 24.7 million from the 6.7 million we reported in fiscal Q1 of 2002. Revenues from our enterprise products, which includes channel and direct sales of the company's personal and server products to licensed corporations for internal use was 3.0 million, or up about 700,000 from what we generated from these products last quarter. We saw an increase in sales in our direct licensing channels, driven by an increase in sales from our new server-based product offering. Our retail channel also benefited from the launch of Intellisync 5.1 in October.

Revenues from our technology licensing offerings was approximately 2.0 million, or down slightly from the 2.1 million generated in the segment last quarter. The increase in professional services revenue associated with the deployment of our technologies was offset by decreased royally revenues from some existing OEM partners and expiration of some multiyear contracts.

Looking at deferred revenues, our reported balance remains flat at 2.7 million.

Cost of sales for this quarter was approximately 824,000, or 16.4 of revenue, as compared with 911,000, or 20.7 percent of revenue we reported last fiscal quarter. The declining cost of sales was primarily a result of reduced online service costs associated with the online service offerings that were discontinued in July 2002. This decrease was partially offset by an increase in professional services costs driven by the increased professional services revenues realized during the quarter.

I'll now focus on functional pro forma operating expenses, which exclude non-cash amortization and stock compensation. Engineering expenses were 1.8 million, or 35.0 percent of revenue, down $900,000 from the 2.7 million or 60.5 percent of revenue we reported last fiscal quarter.

The majority of this quarter's spending decrease was due to the realization of a full quarter's benefit for the engineering workforce reductions completed last quarter. The related consolidation of our Sanacruise (ph) engineering facility into San Jose also contributed to the decline in engineering expenses during Q1.

Sales and marketing spending increased slightly at about 2.6 million or 52.6 percent of revenue from 2.5 million or 57.8 percent of revenue reported last fiscal quarter. Strict cost management resulted in a continuation of the relatively low levels of discretionary spending in corporate and channel marketing-related related programs, as consistent with the prior quarter.

Spending on G&A declined to approximately 1.1 million or 21.7 percent of revenue from about 1.2 million or 27.6 percent of revenue reported last quarter. This quarter to quarter decrease was primarily a result of reduced payroll costs as G&A declined versus July levels.

This quarter's pro forma operating loss, excluding intangible amortization and non-cash stock compensation was a loss of 1.3 million compared with a pro forma operating loss of 2.9 million reported last fiscal quarter and 5.2 million reported in Q1 of last fiscal year. Intangible amortization was 146,000, down about 900,000 from what we reported last quarter as a result of the write-off of our discontinued browser technology at the end of Q4, as well as the adoption of FAS 142 in fiscal Q1. As a result of FAS 142, we will no longer be amortizing the 2.7 million of goodwill remaining on our balance sheet.

We also recorded 62,000 for non-cash stock compensation charges for below market option grants to employees, primarily related to a previous acquisition.

Our reported operating loss of 1.5 million compared with a reported operating loss of 12.3 million last quarter and 7.0 million recorded in Q1 of fiscal 2002. We reported interest in other income this quarter of 211,000 as compared with 184,000 reported last quarter. We provided 88,000 for income taxes, primarily representing foreign tax withholdings that we incurred on royalties received from international OEM customers, as well as estimated international income taxes owed.

Our pro forma diluted loss, excluding intangible amortization, non-cash stock compensation, and various one-time charges, was 1.2 million or 3 cents per share this quarter as compared with a pro forma loss of 2.8 million or six cents per share reported last fiscal quarter and a pro forma loss of 4.9 million or 11 cents per share in fiscal Q1 of 2002.

Our reported net loss this quarter was 1.4 million or a loss of 3 cents compared with a reported loss of 12.4 million or a loss of 27 cents per share last fiscal quarter, and a reported loss of 6.7 million or 15 cents per share for Q1 of last fiscal year.

Turning to the balance sheet. Our financial position remains strong, and we ended Q1 with 31.4 million in cash and short-term investments and no debt. Cash in investments declined approximately 3.1 million during Q1, with 2.0 million of this total related to the payoff of loan balance that had been outstanding on a bank line of credit at the end of Q4.

Capital expenditures for the quarter were 48,000, and non-cash operational depreciation of approximately 382,000 is included in our pro forma expenses in fiscal Q1. DSOs are at 53 days, down from the 62 days we reported last quarter, and we continue to be very comfortable with the overall quality and collectability of our net receivables.

These are all my comments on historical and quarterly information. I will now turn call over to Woody.

Thank you, Keith. I am pleased to announce that, for Q1 2003, Pumatech was able to post a 14 percent revenue increase, our first in nearly two years. This is excellent news, and a significant accomplishment, particularly in light of the sluggish economy.

In addition, we made major progress towards our goal of profitability by posting a loss of three cents a share versus the 27 cents per share loss last quarter.

As you may remember from our last call, during fiscal Q4 of 2002 we were aggressively taking steps to streamline our operation, refocus our product lines, and strengthen our management team. While many of these actions were difficult, they were clearly necessary if we were to get Pumatech back on track.

I am happy to say that, by staying the course and remaining committed to our goals, we were able to achieve our first quarter to quarter revenue increase in seven quarters and improve our overall bottom line.

How did we do it? Several ways. One, by developing a plan and sticking to it. Last time we spoke, I mentioned that Pumatech needed to refine and refocus its product offerings. After long and thoughtful deliberation, we chose to focus on two areas --synchronization and mobile applications development for enterprise customers. By maintaining that focus, we were able to boost revenues through our new server-based products.

Additionally, we were able to benefit the bottom line by applying maximum resources to only the most strategic areas of our business.

Second key to our success this quarter was our partners. Mobile computers, PDAs, and phones are increasingly being integrated into mainstream business. Exciting technology, such as phones converged with PDAs, wireless tablets (ph), leveraging 2.5 and three G and 802.11 wireless data networks are making new, cutting-edge applications possible. This technology is not just enjoyed by consumers, but is also making mobile applications practical for all parts of the enterprise and small businesses.

Groupware features, like e-mail and scheduling, as well as applications like sales force automation and customer support, will be much more valuable when fully accessible by traveling professionals and technicians. I would like to thank our many partners for their continued support, and the great products they have developed.

The final and very important key to our success is in our employees, who worked tirelessly to ensure that they got the job done. From engineering to services to marketing to sales to finance and administration, everyone pulled together and made the sacrifices necessary to get us over the first hurdle. I am thrilled to be working with a dedicated, motivated team at Pumatech.

Let me take a few moments to highlight the several accomplishments in the last quarter that helped us reach this key milestone. On the product side, we continue to focus our energies (inaudible) enterprise. During Q1, sales of Enterprise Intellisync Server and Satellite Forms (ph) mobile app designer software to enterprise customers began to make measurable contribution to our growth. Enterprise Intellisync Server enables local and remote synchronization of both PAM (ph) and custom data among servers, PCs, and mobile devices. This functionality is critical for businesses that need to access and manage information in devices across an entire enterprise.

Satellite Forms mobile app designer provides quick development of custom handheld apps that integrate with corporate back-end data sources via the Enterprise Intellisync Server. Custom development tasks that would normally take months to accomplish can now be completed in a matter of days or weeks.

On the retail sync side, we continue to dominate, with over 85 percent market share. Our latest offering, Intellisync 5.1, offers users significant enhancement, such as the synchronization of e-mail attachments, as well support for the popular Microsoft Outlook Express.

In addition to increased product sales, we grew sales in Japan through OEM partnerships, such as those with NEC, Sony, Sharp, Casio, and Kyocera, and through enterprise customers such as J-Phone (ph), a major Japanese manufacturer of smart phone.

We will continue to focus our efforts on driving additional revenue from these kinds of customers in both Japan and Europe, as well as the United States.

As I mentioned earlier, the key to our most recent success has been our employees. Over the past 90 days, we have focused on strengthening and building our management team, particularly in the areas of sales and marketing. Two key individuals have joined us, and their contributions have already been significant.

Clyde Foster (ph) is Pumatech's SVP of Sales and Marketing, and directs the company's various sales teams and our corporate communication organization. Clyde has more than 20 years of executive-level leadership experience, most recently as president and CEO of E-Convergent (ph), where under his leadership the company was named on the Information Week's top 100 innovative companies. Clyde has also served in a variety of leadership roles at Aztec (ph) Communications and IBM.

Joining Clyde in our marketing organization is Pam Desiol (ph), our VP of Product Management. Pam and her team are responsible for working with our engineering organization to bring advanced synchronization products to market. Pam was most recently senior director of platform product marketing at Palm. She also has held a variety of product management positions at Adobe Systems, Apple Computer, and Sun Microsystems. We are thrilled to have these two outstanding players on our marketing and sales team.

While excited about our accomplishments this quarter, we remain cautiously optimistic when looking at the future. The economy remains sluggish, with IT spending still at record low levels and retail buying patterns continue to be extremely uneven due to the jagged economy.

While we have made excellent progress towards - in building our international base, further effort is required to strengthen our business and sales relationships, particularly in Europe. We have and will continue to increase our emphasis on quality and customer service. Service is not only important to our revenue growth, but to our profitability. I'm a believer in the concept of quality is free developed by Philip Crosby (ph). In my experience, though, quality isn't just free - it actually costs a lot less to delivery the highest possible quality product to our customers.

That said, we have made tremendous strides. I am excited about the future. It is clear that we have the right team in place. Our product focus is on the target. Our patented technology will continue to provide us with a leadership position in the mobile space. We believe that the synchronization and mobile application development technology segments are poised for rapid growth throughout the decade. We are building a strong - a solid foundation upon which to develop industry-leading tools for the mobile worker. At the core of that foundation are our customers, partners, and employees.

I will now turn the meeting back over to Keith Kitchen, who will provide guidance for fiscal 2003 -- quarter two 2003 - Keith.

Thank you, Woody. I will now update our financial guidance and limit my comments specifically to Q2 of fiscal 2003. We believe revenue in fiscal Q2 will range between 5.4 million and 5.9 million. We expect to see an increase in our enterprise revenues, including an uptick in retail business commensurate with the upcoming holiday season, which has traditionally been a strong retail quarter for us.

Looking at gross margins, we expect our gross profit margin percentage to improve slightly to about 84 percent.

As for operating expenses, they have declined dramatically over the past six quarters, and as a result of the aggressive expense reduction - as a result of aggressive expense reduction initiatives. Based on the turnaround in the revenue trend achieved in Q1 and our revenue outlook for fiscal Q2, we now expect to see modest increases in operating expenses as we make selected investments in our sales and marketing infrastructure to support the increased revenue activity.

With regard to G&A expenses, while we did not incur the anticipated increases in legal expenses for the ESI patent infringement litigation in Q1, we are now forecasting these costs to begin ramping in the upcoming quarter. As a result of these trends, we expect the following for fiscal Q2.

Sales and marketing expenses are expected to increase approximately 10 percent to 2.9 million as a result of increased personnel-related costs and a modest increase in marketing program spending commensurate with the holiday season. G&A expenses are expected to increase approximately 300,000 to 1.4 million, primarily as a result of anticipated costs for the patent infringement litigation. Next quarter's research and development will be relatively flat, at approximately 1.8 million.

We expect other income to be about 170,000 in fiscal Q2, and we expect to provide approximately 100,000 from income taxes during the upcoming quarter. We estimate our weighted average share count to be approximately 46 million shares, excluding any treasury stock add-backs associated with our option grant program, since these shares are anti-dilutive.

As for non-cash charges, we expect intangible amortization to be approximately 150,000 in Q2. Our forecasted intangible amortization relates specifically to capitalized developed technology associated with prior acquisitions.

As I mentioned earlier, as a result of adopting FAS 142 in Q1, we no longer amortize our capitalized goodwill of approximately 2.7 million.

We expect non-cash stock compensation will range between 200,000 and 350,000 in fiscal Q2. Our pro forma break-even level was approximately seven million in quarterly revenue. Break-even on a cash basis was expected to be roughly 400,000 per quarter higher due primarily to ongoing lease obligations on facilities that are no longer occupied.

We remain financially strong and viable, and this financial strength will allow us to continue to invest in improvements in operational efficiency, channels to grow revenue, and new sync (ph) and mobile computing initiatives.

These are all of my comments, and I will now ask the operator to open the call for questions - operator.

At this time I would like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad.

We will pause for just a moment to compile the Q&A roster.

At this time there are no questions.

Your first question comes from Mark Graze (ph), interested investor.

Hi, guys. Congrats on the good quarter. Just a quick question. I wanted to know about your MSN announcement and what the revenue contribution might be from there. Thanks.

There's two reasons we don't give out specific information about individual deals. One is, some of the contracts - in fact, many of them have confidentiality clauses, and the other is, we don't want to provide too much information to our competitors.

But our goal with all contracts -- all of our business lines is really to increase the average revenue per transactions - in other words, in some software businesses, they call this ASP, average selling price, and we are marching along that, and this quarter we improved in that area. But we don't feel comfortable giving out specific details.

Understood. Thanks a lot.

At this time, there are no further questions.

All right. We will wrap up the call then. I want to thank everyone who was on the call today, and we look forward to communicating with you in the future. Thank you, operator.

This conclude today's Pumatech earnings call, first quarter 2003. You may now disconnect.