Open Text Corp (OTEX) 2003 Q3 法說會逐字稿

Good evening, ladies and gentlemen. Thank you for standing by. Welcome to the Hummingbird Ltd. Q3 earnings announcement conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulty hearing the conference, please press star zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded. And we'll now turn the conference call over to Mr. Fred Sorkin, Chairman and Chief Executive officer. Please go ahead, sir.

Thank you. Good evening, ladies and gentlemen, and thank you for joining us for our third quarter fiscal 2003 conference call.

Quarter three was a challenging and quite encouraging quarter. While we saw a few deals defer, the overall health of our plan remains strong. Our investments [INAUDIBLE] and acquisitions will continue to accelerate growth and advance our market leadership in the enterprise company management market. Overall revenue for the quarter was $48 million compared to $48 million -- 44 million U.S. in quarter three, fiscal 2002. The projected earnings of U.S. 26 cents compared to U.S. 26 cents in quarter three fiscal 2002. Our cash position for the said quarter is $111.2 million U.S. This reflects the Kramer Lee acquisition completed in the quarter.

During the quarter, we completed the Kramer Lee acquisition, and on July 1st we completed the Valid Information Systems acquisition. These acquisitions are designed to help us accelerate growth in our core markets. We are committed to a strategy that focuses on high value and dissolution that leverage Hummingbird enterprise.

Let me now turn to the key accomplishments in this quarter. During the quarter we achieved a number of major milestones that support our strategy to consolidate and strengthen our market leadership in enterprise content and compliance management. Multiple accomplishments during this quarter included: Release of the Hummingbird Enterprise 5.1, that provides scalable [INAUDIBLE] for suites for the deployment of content and combined solutions. We continue to see an accelerated adoption of Hummingbird Enterprise within our installed base of customers. The recognition of Hummingbird by the Gartner Group as a market leader in the integrate commitment management segment.

Recently Gartner updated [INAUDIBLE] AND Hummingbird was moved to the leadership position based on brand and product structure, encompassing content and document, calibration and information access. The recognition of Hummingbird by Forester as a leader in records and compliance solutions. Based on [INAUDIBLE] Hummingbird first mover advantage by virtue of its widely deployed document and records management solutions, they considered Hummingbird as having the broadest market presence among the group of competitors.

We continue to advance the functionality of the Hummingbird records management solution. These are based on specification and physical storage management. Recently Hummingbird was chosen to receive the prestigious Product of the Year Award by [INAUDIBLE].

The acquisitions are designed to consolidate our market leadership within our core markets, create sustainable incremental revenue and raise barriers for our competitors. Legal Key and Kramer Lee provides the map expertise in the delivery of practice management and portal solutions to law firms which will fully leverage all the components of Hummingbird enterprise. This [INAUDIBLE] and Valid Information Systems provides correspondence management and compliance solutions to the public sector. By 2005, all UK government agencies must have approved standards-based compliance solutions.

We launched two new solutions: Hummingbird Enterprise for ESRI and Hummingbird Enterprise for contract management. Those solutions are now generating traction with most of the Northern Colorado Water Agency and the Valley Center Municipal Authority. Equally, the contract management solution is demonstrating momentum with the close of two significant early adopters.

In summary, our strategy is generating tangible and visible results in terms of continued customer adoption and industry analyses [INAUDIBLE]. Our initiatives to deliver better integration between components of Hummingbird Enterprise, our market leadership in document and compliance solutions, coupled with our increased focus on targeted line of business solutions and acquisitions. Further, [INAUDIBLE] Hummingbird as a leader enterprise content management solutions. We are poised for growth, and we feel we have the means to execute on our strategy.

And now I think Inder will provide a summary of our financial results for the quarter.

Thank you. Good evening, ladies and gentlemen.

[INAUDIBLE] statements are forward-looking statements which involve risk and uncertainty. Actual results could differ materially as a consequence of a number of facts including changes in market and competition, technological and competitor development and potential down trends and economic conditions generally. Additional information on these and other potential factors that could affect the company's financial results are included in documents filed with the [INAUDIBLE] and Securities and Exchange Commission, and also please look at the press release for a complete statement on this.

We have reported our unaudited financial results in U.S. dollars in accordance with U.S. GAAP. Some of the numbers exclude the effect of certain items which are later defined. The following are a few highlights which summarize the results of the current quarter for which I will discuss the detailed results of our operations.

Sales for the third quarter were $48.1 million U.S. dollars. Enterprise solutions revenue were 13 -- sorry, $31.1 million, while connectivity sales was $17 million. Enterprise solutions sales were 17.1% higher than the third quarter of last year and 6.3% higher than the second quarter. The total operating expenses this quarter were $36.2 million, up from $33.2 million in Q3 of fiscal 2002. The EBITDA was 8.1 million, 16.8% of sales, compared to 8.5 million, which is 19.3% of sales in the third quarter of last year, and $10.1 million which is 21.4% of sales in the second quarter of this year.

Adjusted net income in the current quarter was $4.6 million, compared to $4.8 million recorded a year ago. As a percentage of sales, adjusted net income was 9.6% compared to 10.9% in the third quarter of last year. The positive cash flow generated from operations in the quarter was 7.6 million. Cash and cash equivalents and short-term investment was slightly up from the previous quarter at $111.2 million, after the acquisitions made during the quarter. The differed revenues continued to increase quarter over quarter to 50.8 million in the third quarter, up $2.8 million from the second quarter and higher by $9.1 million from a year ago.

Now, I will give you the results of operation overview in more detail. As mentioned earlier, the sales for the current quarter were $48.1 million, 4.1 million higher than the same quarter last year. Revenues, as I mentioned earlier, from enterprise solution was $31.1 million, $4.5 million higher than the third quarter of a year ago, an increase of 17.1% and 1.9 million higher than in the second quarter, an increase of 6.3%. Revenues from connectivity was 17 million. The product revenues during the quarter were 23 million. Services revenue was $25.1 million during the quarter.

As previously stated, the adjusted net income which includes the amitorization of intangibles and in-process research and deferred income tax adjustments all net of taxes was $4.6 million for the quarter compared to $4.8 million for the same quarter a year ago. Adjusted diluted amortization based on adjusted net income was 26 cents, the same as the period -- the same as the third quarter for the last fiscal year. The current adjusted diluted amortization is based on diluted weighted average number of shares of 17.7 million compared to 18.5 million in the third quarter of the previous year, reflecting the repurchase program of the current year.

The geographical breakdown of the sales during the quarter were: Americas was 60%, Europe was 35%, and the rest of the world was 5.5% or so. In the current quarter the growth process was 90.1% of sales, slightly down from 91.4% in the same quarter of the last year. The sales and marketing expenses were $21.1 million, which is 43.8% of the sales, up from 19.6 million from the third quarter of last year. And slightly down as a percent of the sales from 44.5% of the sales last year.

The sales and marketing expenses as a percentage of sales were 42.5% in the second quarter of the current -- the second quarter of the current fiscal year. The increase in sales and marketing expenses was mainly due to the cost of acquisitions now being reflected for a full quarter.

The R&D expenses were higher at $9.9 million in the current quarter as compared to $8.6 million from a year ago. As a percentage of sales, these expenses were slightly higher at 20.7%, versus 19.5% in the same quarter of the previous year. The increase in R&D expense over the prior quarter was primarily due to the cost of the acquisitions.

The G&A expenses were up slightly to 5.2 million in the current quarter, compared to 5 million in the third quarter of the last year. As a percentage of sales, they were 10.7%, down from 11.3% in the third quarter of fiscal 2002.

The total operating expenses excluding amortization of intangibles were 36.2 million, which is 75.2% of the sales, up from $33.2 million, which is 75.3% of the sales in the same quarter of the last year. Overall, the operating expenses are higher in the current quarter, in comparison to the third quarter of last year and to the second quarter of the current year, due to this quarter being the first quarter to include all of cost of LegalKEY and Dispro acquisitions that closed in the last month of the second quarter.

The EBITDA was 8.1 million which is 16.8% of the sales for the quarter compared to 8.5 million, 19.3% of the sales in the third quarter of the prior year. The amortization of intangibles was $4.7 million, down from $7.5 million in Q2 of the last year. This amount has come down as we are no longer amortizing goodwill, as per the new accounting rules with respect to intangibles. These are on account of various acquisitions made by the company.

The interest and other income consists primarily of the net interest income. The income tax expense was $1.4 million this quarter. The operational tax rate is approximately 38.5% for the purposes of adjusted net income and adjusted amortization.

Overall the company reported a net income of $1.4 million, and basic and diluted earnings per share of 8 cents for the quarter compared to net loss of $1.8 million, and basic and diluted loss per share of 10 cents for the third quarter of the previous year. This change is due to increased level of sale and absence of amortization of goodwill from amortization of expense compared to the third quarter of the prior year. The adjusted diluted number of shares for the quarter was 17.7 million compared to 18.3 million in the year ago.

Coming to the nine-month results the revenue for the nine months ends 30th June, 2003, was were $139.2 million, an increase of 3.7 million over the previous year's nine-month period. Net income for the current nine-month period was 5.2 million, resulted in diluted earnings per share of 29 cents compared to net loss of 2.9 million and diluted loss per share of 16 cents for the first nine months of fiscal 2002. Adjusted net income for the nine-month period was 15.6 million compared to 15.4 million for first nine months of the last year. The adjusted diluted earnings per share for the current 9 months based on adjusted net income was 87 cents compared to 84 cents for the prior year's nine-month period. The cash flow generated from the operations for the nine month were 24.3 million for the nine months.

Turning to the balance sheet, I will just highlight some of the important items there. The total assets were $356.6 million, up from $352.1 million as of the end of the previous quarter. The increase is mainly due to increase in intangibles as a result of acquisition made during the quarter. The cash and cash equivalents and short-term investments were $111.2 million, comparable to 110.2 million at the end of the prior quarter. Again this was after the acquisitions done during the quarter.

The account receivables were $54.4 million, up from $53.6 million at the end of the last quarter. DSOs based on the trailing four quarters were 107 days compared to 108 days compared to the previous quarter. I would like to add another important information, which we will be giving for the first time. These number of days outstanding include [INAUDIBLE] GST and sales and use tax and other commodity tax which come to roughly eight days of the quarter of the DSO items.

The fixed assets were 12.1 million, slightly higher from 12.2 million in the previous quarter primarily due to the acquisitions in the quarter. As mentioned earlier, the intangibles increased to 155.6 million from 151.4 million at the end of the second quarter due to the acquisitions in the quarter. Boo-to bill at the end of quarter was 91.3 million. The deferred revenue was higher at 50.8 million, up from 48.1 million at the end of the last quarter. The shareholders equity was 265.3 million, slightly higher at the end of the previous quarter. The number of employees at the end of the quarter were 1,402.

Barry will give you the details of the deals for 100,000 and more received during the quarter and I would like to wrap this up with a -- some of the hot sales of the quarter. The sales were 48.1 million, up by 2.3 million over the second quarter. Product revenues were 23 million, EBITDA was 8.1 million, adjusted net income was 4.6 million, positive cash flow generated from operations were 7.6 million for the quarter. The deferred revenues was up by 3 million, almost 3 million in the quarter, and the completed -- the completed third acquisition of the year in the quarter, and with that I would like to hand it over to Barry to give you the synopsis of the business during the quarter.

Thanks, Inder. As Fred mentioned, we remain committed to our strategy that continues to focus on maximizing revenue from our installed base of customers, establishing market leadership in records and compliance solutions, and extending our market reach through line of business solutions. The IMS revenue is up 17%, Q3 '03 over Q2 '02. We are seeing substantial quarter growth in the IMS revenue in fiscal '03. This positive trend line is due to the combination of increased adoption of Hummingbird enterprise within our installed base and continued confidence in our products through maintenance renewal rates that exceed 90%.

We're encouraged by the growing backlog of customers that plan to migrate to Hummingbird Enterprise 5 platform. Last quarter we announced that we had 332 customers representing 170,000 seats in the process of of evaluating or migrating from our Legacy 2 open platform to Hummingbird enterprise. As of the end of the third quarter, we now have about 400 customers totaling 190,000 seats that are in the process of migrating from DOC to Hummingbird 5.

We are also encourage by the degree by which our solutions focus is getting momentum. Our solutions focus not only leverages all the components of Hummingbird Enterprise suite but they also allow to us sell on value as opposed to product features. The Hummingbird Enterprise for contract management solution incorporates almost all of the components of Hummingbird enterprise including Hummingbird DM, RM, and KMN collaborations. This is a higher value solution which will increase the average transaction value per deal. Combined with the integration of solution specific templates for contract creation workflow contract approval, our sales forces can target the solution of the economic buyer as opposed to IT departments.

Similarly, the Hummingbird Enterprise for [INAUDIBLE] solution targets an increasingly important market opportunity to bridge geographic and special information with documents and content. This application spans multiple industries such as government, homeland defense, utilities retail, financial services and manufacturing. Our partnership with [INAUDIBLE], the market leader of GIS software, enables to us reach a large installed base of over 300,000 ESRI customers, sell a highly targeted solution with a well-defined business opportunity, and helps to sell additional Hummingbird products.

In summary, we remain resolute on the focus of a three-prong strategy: Consolidate our market leadership in our core markets, establish leadership in records and compliance solutions, and expand Hummingbird Enterprises with solutions that target new market opportunities. We are on track on all of these objectives on all fronts.

Now, as is our tradition, I will give you a flavor on our deals over 100k this quarter. In Q3, we had 51 deals totaling $11,765,000. And some of the customers were Baker & McKenzie, our Canadian government, Rational Software, IBM, Florida Department of Transportation, and Barkley's. Thank you and I will now turn it back to Fred for the close-up.

Okay. In closing, I'd like to once again reiterate that I am pleased with our recent acquisitions and that the overall health of our pipeline remains strong. We continue to focus on both,the fundamentals of our business and on strategy that focuses on high volume across the industry solutions with Hummingbird enterprise. Thank you very much. I will now turn this over to the questions.

Thank you one moment, please. Ladies and gentlemen, we will now conduct the question-and-answer session if have you a question, please press the star followed by the one on your touch-tone phone. You will hear a three-tone prompt. If you would like to decline from the polling process, please press star, and press the number 2. Please be sure to use your hand set. Your first question comes from Scott Penner from TD Newcrest. Please go ahead, sir.

Yeah, thanks. Just wanted to make sure. You mentioned the year-over-year and sequential growth for the IT business. Just as far as the product portion, are the growth rates about the same?

More or less yes, Scott.

Okay. And the -- can you just confirm, I guess, Inder, the revenue from the acquired businesses?

We -- we -- in the process of integrating all the acquisitions, Scott and that's something which we don't give as we go along with as yet.

Okay but just -- I mean, in the last conference call you said that acquisitions were about $1.5 to $2.5 million in the quarter. I wanted to kind of firm that number up.

It is approximately the same numbers, yes. You're right.

Okay. Great. And I guess, Barry, just on the contract management and the other line of business applications, what sort of verticals have you seen being some of the early adopters?

Those are the verticals, Scott. The point is I think you will see that -- at least the customers we mentioned, on the ESRI stuff, on the GIS stuff, is initially Northern Colorado Water Agency and the Valley Center Municipal Authority. I think you will see that it's a lot of --

Much more.

A lot of agencies that are government agencies that will be taking part in this initially, but by the same token there's a lot of retail companies that will be moving in this. I know one of the things I read was the world's largest user of GSI technology was McDonald's, when they are setting up their stores. Of there are a number of retail places working with that and this stuff is starting to explode now.

Is part of the strategy to use the line of business applications to get more vertical exposure, like the retail market?

Absolutely. Absolutely. All of this is actually to put more of a solutions emphasis on it than product and both of these that we talked about today are going out as solutions.

Okay. I guess just finally, Inder, the EIP segment, I guess last quarter you said sort of the percentage of licensed revenue from new customers was in and around the 25, 27% range. Are we consistent this quarter?

Roughly about 25 to 30% or so. Yes.

Okay. Thanks very much.

Your next question comes from Jeff Fan from UBS. Go ahead, sir.

Hi, good afternoon, gentlemen. A couple of questions. One, some of the split deals in the last quarter. Can you update us on how many of those or a percentage of those value deals have slipped, have closed so far in July?

I told before, I think so, that it was about four, I think deals with slippages on July, and -- not July, but two of these close on July 1st or 2nd.

And what type of size are we talking about on those deals? So no update, basically.

The same story.

Okay.

The quarter is going on, but -- but I am saying that it is mostly two of the four was really closed on 1st or 2nd of July.

Okay. And on the incremental costs within the quarter related to acquisitions, I believe on the last call you said that about $700,000 was related to sales force training or $200 to 300,000 related to severance or staff realignment.

Yes.

Can you reiterate, those are one-time in nature and you don't expect to see those costs come in again, I guess in your current quarter.

Current quarter I don't think so it is coming. It is one short work force.

And lastly can you give us a head count that you ended the quarter with and also where you expect to be post all the acquisition realignment of staff?

Yeah, the 1402, which I gave, that does not include the acquisition of Valid, which we closed in July.

Right.

That is roughly about 65 or so. And in the quarter we don't expect a material change.

Okay. Great. Thank you very much.

Your next question comes from David Beck from RBC Capital Markets. Go ahead, sir.

Inder, I missed the number for the DSOs that you stated and I just wanted to understand what you're doing to manage that number, why it's -- why it seems to be kind of stuck as being a little bit high.

David, the DSOs are 107 and I also gave an explanation --

For the eight days. I picked up the eight-day number.

Eight days because of the commodity tax issues in that number. This number, actually would have been lower but for one decent-sized payment. One or two decent-sized payment not coming in the quarter and they should be falling in the quarter -- in the current quarter.

But you missed as well these closing of deals at the quarter end, which should have improved the situation.

But our revenues up, $48 million, and another matter which is also due to the fact that our deferred revenue go up in the quarter. So that is also -- the deferred revenue once it goes up, it increases our receivables also. So there is a small component of that too. These are some more details.

But what percentage is beyond 90 days?

Beyond 90 days is roughly about 15%.

Okay. Okay. And any comments on an outlook for Q4 and next year at all?

You're talking about DSO?

No, no, not DSO. Next topic, in terms of top and bottom line, are you commenting on the fourth quarter and next year at all, Fred?

Yes. I think I will give you some figures, probably you will expect between 50 to 53. On top line.

Okay.

And about probably 34, 35 on bottom line.

Okay. Very good. Well, I will turn it over to the next person. Thanks.

Thanks a lot.

Your next question comes from Howard Lis from GMP. Please go ahead, sir.

Thank you very much. Just a couple of follow-up questions. Was that 62-63 million topline for Q4?

I'm talking about 52 to 53.

Okay, thanks. And Inder you said the DSOs above 90 days was 15% and above 120 days would be under10%?

Well, they are very close. It is about 13% or so.

Okay. Great. And in terms of the acquisitions you completed the KLA acquisition during the quarter, how much did that add, if anything, meaningful to the deferred revenue?

First of all, have you to understand one thing, guys. The KLA, it was selling our competitor, IMANAGE, and they have to make all of of this turn around to start to sell our technology. So this will take sometime to -- really to bring them up to speed. For example, again, they were training on Saturday, Sunday, and so on. And honestly speaking, it is very difficult for me to judge today when they will start -- and I can give you really example -- I can give you an example they have turned my competitor to Hummingbird technology, but it's very difficult to judge for me and to say when they will be up to speed, real up to speed, what I expect from them. But probably I think it will take a quarter, maybe quarter and a half to bring these guys up to speed from point of revenue.

How much do you expect of the -- the valid acquisition to add in the upcoming quarter.

It is again very difficult to say how many or how much because these guys right now start and really process of real integration with our UK -- I mean, government sales forces and really accept right now go to Europe on 11th of this month to take a look how we will bring and what kind of revenues they can tie together our office and their salespeople generate. So it is very difficult for me to say right now. Exactly figures.

Are there any deals over $1 million in the quarter.

Yes.

How many were there.

Two, I think so.

Yeah, two deals over $1 million.

And is one of those one of the receivables, Inder, you were referring to?

That is one, and there is the one deal -- one or two deals from the previous quarter that we are supposed to get the money that we didn't. The government says there there is no problem. Government is a very high class customer. There's no problem in terms of not getting any money but it is just the timing differences and we should be -- we are hopefully getting that money during the quarter.

And one other minor other long-term liabilities jumped about $900,000 sequentially, was that related to acquisition?

It was mostly acquisition, that's right.

All right, thanks very much.

Thank you.

Your next question comes from David Wright from BMO Nesbitt Burns. Please go ahead, sir.

Thanks very much. Good evening.

Good evening.

Could you talk about the competitive environment? I mean Imanage put up growth numbers year-over-year. Have you noticed anyone becoming more aggressive on pricing or not at this stage?

No, I don't think so on pricing. No. I mean, first of all, from point of Imanage, I mean if you say it's easy to make, you know $10 million to $11 million --

Right.

Then you understand this probably. But secondly, I mean, pricewise, they are very low price selling and from my standpoint, probably the first break, whatever, and I don't know it will be next quarter. So this is not really an example for us. But from our pricing, I moon we keep the pricing, we selling really -- I don't say on decent amount of money receipts and I don't see any kind of changes.

Okay.

For example, if you take solutions, solutions very high you will see.

Right.

Like, for example what we are doing for [INAUDIBLE] or what we're doing in contract management, it's quite substantial.

I would have expected, though, that Imanage would have had poorer results than they actually had because I -- because of your impact.

I'm speaking from results. It's not easy, but easier to do from 10 to 11 than 1 to 2 when you are talking about on -- you know 48 or 50 million in this range.

Okay.

Also what happened with us? Do I think the market is going down? Probably such quarter was when market was really not so gracious to -- what we say, to pick up. But I hope next quarter will be much better.

Okay. Barry, when you read off the customer list, did you slip in SAP as a customer.

No, David, I didn't mention SAP.

Just before, I think it was Barkley's.

Barkley's was the last one.

Okay, the second or third last.

Oh, Denton Wild Sack, not SAP.

Okay. And then looking at operating expenses and -- so you've mentioned that there were a number of one-time events in this quarter, could you expect that the operating expenses next quarter should be lower or not because you acquired all these people from the acquisition.

Basically what we had earlier is that these acquisitions were going to be -- and Fred mentioned in the last call as well, that they are expected to be be profitable, at least, if not more to Hummingbird standpoint of view, by end of next year. So I think we expect our net operating margins to -- yes. And overall our net margins are expected to be roughly in the range of 11 to 12% or so. So that gives you an idea of of where our expenses would be like.

Yep. Okay. That's helpful. Thank you very much.

Your next question comes from Blair Abernethy from Paradigm Capital.

Sorry I didn't get the percentage on that last question.

Net margin?

Yeah was it 11 to 12?

Yeah, that's right. Net margin -- let me clarify once again. It is after tax what I am talking about.

Okay.

Net operating margins.

Tax to operate. Okay. And what is the interest rate you are getting on your cash today?

Very little. Most of our money is in U.S. dollars. So we're getting roughly about 1, 1.2% or so.

Okay.

And it's very well spread all throughout the country so some of the money we are not even getting that much percent.

Okay. I was just wondering if we could get some commentary on the connectivity revenue. Were any of the slipped deals connectivity deals? And also in sort of looking at the trend in the last four quarters it's been slowly but steadily down. I'm just wondering if you guys are seeing a bottom coming on this at all or are you expect more of the same.

Well you see -- first of all, you see this more or less flat. I see as between, let's say usually 17.5, 17 in this kind of figures. I expect probably better results in fourth quarter. And if you compare with last year, it will be the same between probably 72, 73 million. So I don't see a any big changes on the connectivity side. It's stable and flat. Quarter to quarter. That's what we expect. Before each session is over. Those slippage of the deal is normal. It is they execute very well.

Okay. And just, Fred, on the acquisitions.

Yes.

What's -- what are you -- you still got $111 million, and lots of positive cash flow.

Yes.

Are you still looking for more acquisitions?

Yes. Absolutely yes.

What areas?

In what areas? Hmm. I mean, there are areas for sure. First of all, we're looking for areas in the States and areas of increased market share. Absolutely. To increase market share in our market space. That is what I'm looking right now.

Okay. Great. Thank you.

Thank you.

Your next question comes from David Shore of Desjardins Securities. Please go ahead, sir.

Yeah, thanks. Can you talk about bundling deals and customers buying more than one product, more than a DM and RM or do a collaboration and portal and how that is moving.

The bulk of the big deals are bundle deals. They are all deals with more than one product.

And what about below that? Are you see people at more of an entry level, even at a small level.

Again, the who he will point is to go out and push multiple products and the sales force has known that they are not supposed to be going out there and trying to push one thing. And that's not what they are doing. I think we are seeing traction across the board from the larger deals down to the smaller deals where there's more than one product going out.

Good. What's happening with the share buyback program?

We start to buy again shares back from market and we still have rights to acquire both 300,000 and probably during the quarter four, we will execute this task. And for the year probably we'll be around 950 total.

Okay. Just coming back to the competitive situation. Any comment on IBM buying AVTRIX.

No comment. Do you have something in your mind.

No, it seems to be be a pretty small vendor. I'm wondering if you are seeing them competitively?

No. No. Not today.

Okay. Thank you. That's it for me.

Thank you.

Your next question comes from Peter Misek from Scotia Capital. Please go ahead, sir.

First of all, following up on IBM, they announced the launch of its new Lotus products and they are going to focus on record management for serving certain issues. Have you bumped into them? Are you not bumping into them? Different market segment? And then I have another question on deals.

No, we don't bump up with the guys at all. I mean, we understand they like to be in this market too, but everything is no. I didn't see at all.

Okay. On the -- on your deals and maybe a little bit into your pipeline the -- obviously the Gartner announcement and Forrest were very big. You are now viewed as leaders. Can you give us any color on bookings or when we can see that trend later to pick up in sales? Those two impacts usually are fairly positive for sales or have a good correlation of sales into --

It's always nice to have a feeling about the company. It's no doubt it helps with sales. That's absolutely right and by the way, what is very respectable company forrest, it is really fantastic endorsement in quadrant where we are leaders on the web site is probably right. In many things we are right now -- we are selling and RM very, very, I will say -- and we are, very, very popular, I will say in government, agencies and the legal market, whatever and this has helped us because we have really necessary -- I mean, our products and in Europe, like UK and the states and in government. I mean market, so I think it's really helps a lot what Gartner Group endorsement and the others. Absolutely.

Any color you can give us on -- or detail on the pipeline, how the marketing efforts are going. You know, just give us a sense what kind of pickup you can see out there or what you are seeing out there.

No from point of -- from point of forecast or pipeline, I mean, we seek absolutely increased pipelines, no doubt. And in Europe and the States. And it's not only because of fourth quarter but I think it's in the future, we're going really execute right stuff and right strategy from point of enterprise Hummingbird. And we see absolutely right. I mean increased pipeline and I think it's increased pipeline again not only for quarter four.

Last question, and I will turn it over. On the consolidation that appears to be really picking up in software.

Yes.

Are you guys looking at something bigger to do, to bulk up? Has anyone approached you for a merger?

The question was very difficult to discuss.

No I understand but I have to ask anyway.

Yeah, but I understand you just asking. But, yes, again, I'm looking for bigger apple for sure. And mostly in States right now. It's no -- absolutely no questions that we have to do it and -- and probably -- I mean, I will do it probably -- probably I will have something the next couple of quarters.

Okay. Thank you very much, gentlemen.

Thank you.

Your next question comes from Scott Preston from Research Capital. Please go ahead, sir.

Hi, good afternoon. Barry, maybe if you can just comment on the upgrades to DM 5, just curious with your upgrades, are you see any additional revenues for suite -- per seat and any additional seats. Can you give us some average figures what kind of upside you are seeing as customers upgrade.

You know, I don't have a price sheet but certainly as they are switching over to DM 5 -- we make on the upgrade 250 per seat but we have additional componentry, which is going in that couldn't go in as long as they were setting on the old platform. We open up the rest of our product portfolio as soon as we get that done. That's certainly the upside for us is that the faculty can push other enough to the same customers.

Can you give us any example of the incremental revenues what percentages those are.

No, I don't have those numbers. Sorry.

Okay. Also, on the acquired companies, I guess, you know, Dispro and LegalKEY are probably the only examples because you have those longer, a couple months, but what's the pipeline like for Hummingbird product into some of their customer bases? Have you had any success there with -- I guess that would be pretty preliminary stages there, in that sales cycle but what's the feedback you've gotten so far?

As I have explained before, for example of LegalKEY, it would be -- for legal market in UK but what we're doing with our people -- well, LegalKEY -- I'm sorry -- LegalKEY, right? I'm sorry. LegalKEY, again, is -- you know, they are selling RM and conflict and what they have applications in legal market, successfully, very successfully they selling the stuff and from the point of integration, it's on the way to integrate our legal -- legal sales forces and marketing and professional services on legal side is LegalKEYs and this one right now is going on. So pretty soon it will be like one -- you know, unit sitting in the Hummingbird. So this is what's going on right now. So what you like to ask? How it's going or --

I'm curious, of the customer base --

About deals, right?

Yeah, about cross opportunities have you with Hummingbird product.

I tell you right now our salespeople giving -- I mean our salespeople LegalKEY ours too. Salespeople in LegalKEY giving RM absolutely and otherwise. If LegalKEY see right now any opportunities to use document management or collaboration, or -- for example, these RM rev for environments, they release to our people. Legal guys sitting on our side. So -- but, again, I think as soon as possible probably through the full integration this company, with our salespeople, and our marketing and our professional services and legal market. This is what's going on right now.

Yeah. Okay. Inder, two quick questions for. What was the currency impact on the top line in the quarter. And do you have the renewal -- the maintenance renewal number on the connectivity business?

Currency impact exactly on the top line, Scott, I don't have the exact numbers. It has an impact on the top line, as well as expenses and I tell you that it does not affect that much to us on -- on the bottom line. So it obviously has affected a little bit, to some extent but it's not a material amount at all. And what was the second question, sorry.

The maintenance on connectivity revenue or maintenance renewal rate, sorry on connectivity.

It's 80%, 80 to 85% on the connectivity.

So on the enterprise business, it's 95. 90%.

Yes, it's 90% plus. That's right.

All right. Thank you very much.

Your next question comes from Paul Seecam with ORM Securities. Please go ahead, sir.

Fred, can you just clarify a little bit on the M&A in the states that you are looking at would we be looking somewhere north of $100 million in revenues.

No, I'm looking at revenues somewhere what you say on safety side between $70 and 100, right.

Okay. And any particular -- I would assume on the enterprise side --

Enterprise only.

We've been focusing but I guess is it a technology deal, obviously you will be getting some size there but would would it be -- because at one point Barry said I think -- about two calls ago, you know technologywise you were very happy where where you are at in the world.

He's right. Technology I don't think so. We have quite enough technology. I think by acquisition, we only looking for increase of market presence from point of increase our market share in the same business right now. And in this case, I'm saying I'm going for companies probably between 70 and 100 million revenue.

Okay. Great. And then just one quick -- quick clarification on the staffing side.

Yes.

Have you started beyond legal -- because I understand --

What.

Beyond the legal market or the legal vertical.

Yes.

Have you started to move the sales force in specific roles as far as contract management or geographic or is it still a little early in that process yet?

I think from my standpoint this all -- this too vertical application we say, it's probably about couple months, maybe three months maximum so it's a little bit early to say right now because our salespeople really knows about this application. They are selling them. I mean, I'm more thinking about verticals from point of sales like verticals like [INAUDIBLE]. Like legal vertical, like governmental, like maybe -- I mean, local government vertical, and probably financial or insurance such category verticals. This probably happens next year fiscal.

Okay. Great. Thank you very much.

Thank you.

Your next question comes from Steven Lee from Raymond James. Please go ahead, sir.

Just a quick one. When are you planning the next release of XC and hostExplorer.

Next summer.

And does the revenues pick up with the new release.

Usually pick up, yes. Most on rate side. I mean as far as new maintenance or whatever. But, you know, it's a game as soon as you have certain economic situation, like today, I mean, I will not expect anything from connectivity except what they are doing right now. Second year. I mean, if the economy really start to show, some light or whatever, this case for sure, I think connectivity really proved no doubts.

Okay. Thank you.

Thank you.

Mr. Sorkin, there are no further questions at this time. Please continue.

Okay. So I would like to thank everybody who participated in this meeting, and probably we will hear of each other next time when we deliver new figures on the fourth quarter. Thank you very much. Bye.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.