Open Text Corp (OTEX) 2010 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Open Text Corporation first quarter fiscal 2010 financial results 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.

(Operator Instructions) I would like to remind everyone that this conference call is being recorded today October 27, 2009 at 5 PM Eastern time. I will now turn the call over to to Greg Secord, Vice President of Investor Relations. Please go ahead.

Thank you. Hello, everyone, and thanks for joining us. With me today are John Shackleton, our President and Chief Executive Officer; and Paul McFeeters, our Chief Financial Officer. Before we begin, I'd like to draw your attention to the PowerPoint slides that are posted in the investor relations section of our website, outlining new business combination rules for accounting.

The length of this presentation is posted in the Q1 press release we issued earlier today. I would also like to remind the audience that we're hosting an analyst day tomorrow at our users conference in Orlando, Florida.

This informal analyst event is integrated with the general conference agenda and the presentation materials from the main conference session will also be posted in investor relations events section of our website. And now I'll read the disclaimer.

During the course of this conference call, we may make projections or other forward-looking statements relating to the future performance of Open Text or its subsidiaries. These oral statements may contain forward-looking information and actual results could differ materially from a conclusion, forecast or projection in the forward-looking information.

Certain material factors or assumptions were applied when drawing the conclusions while making a forecast or projection as reflected in the forward-looking information. Additional information about the material factor assumptions that could cause actual results to differ materially from a conclusion, forecast or projection in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion while making a forecast or projection as reflected in the forward-looking information are contained in the Open Text Form 10-K for the fiscal year ended June 30, 2009 and in our press release that was issued earlier today. And with that, I'll turn the call over to Paul McFeeters.

Thank you, Greg. I will begin by reminding everyone that our financial results reflect (technical difficulty) period of two months from the Vignette acquisition. Starting with the financial results for our first quarter and fiscal year 2010, total revenue was $211 million, up 16% compared to $182.6 million for the same period last year.

License revenue was $47.3 million, down 6% compared to $50.1 million reported last year. Maintenance revenue was $[122.6] million, up 26% compared to $98.4 million last year. Maintenance revenue was reduced by $0.9 million as a result of purchase price adjustments related to the Vignette and Captaris acquisitions.

Services and other revenues $40.1 million, up 19% compared to $34.1 million in the same period last year. We reported first quarter adjusted net income of $32.8 million or $0.58 per share on a diluted basis, up 16% compared to $28.2 million or $0.53 per share for the same period a year ago.

Gross margin for the first quarter before amortization of acquired technology was 72.9% compared to 74.7% in the first quarter last year. The decrease was primarily due to lower service margins from Vignette.

The pretax adjusted operating margin before interest expense was 22.7% in the first quarter when compared to 23.7% in the same quarter last year, mainly due to Vignette's impact on the margin. The tax rate for the quarter was 27%, reduced from 28% at year-end.

Within special charges, we recorded $9.5 million of restructuring charges and $1.4 million of acquisition related costs in connection with the Vignette acquisition. Operating cash flow in the quarter was $4.5 million compared to $24.8 million in the same period last year. The decrease was primarily due to Vignette collections, increasing our DSO by five days or $12 million and restructuring costs of $10 million.

The impact of these items would have resulted in a normalized cash flow for quarter of $27 million. Net income for the first quarter in accordance with GAAP was $1.7 million or $0.03 per share on a diluted basis compared to $14.8 million or $0.28 per share on a diluted basis for the same period a year ago. The decrease in GAAP income is primarily due to specialty charges of $18.6 million, so approximately 56.5 million shares outstanding on a fully diluted basis for the quarter.

As in recent quarters, foreign exchange movements had a minimal impact and adjusted earnings by $0.01 per share. On the balance sheet at September 30, 2009 cash was $212 million compared to $276 million at the end of last year.

Accounts Receivable was $135.6 million, up from $115 million at the end of our June quarter. Days sales outstanding was 58 days as of September 30, compared to 51 days for the previous quarter and 53 days at the end of Q1 of last year.

Deferred revenue was $217 million compared to $197.3 million as of June 30, 2009. The changes in the balance sheet from June 30 to September 30 are primarily due to the acquisition of Vignette.

On July 21, we completed the acquisition of Vignette. The aggregate value of the consideration pay was approximately $321 million. As part of the consideration, we issued 3.4 million shares valued at approximately $125 million and had an initial cash outlay of $183 million.

Net of cash and short-term investments held by Vignette, the net (technical difficulty) $44 million. As part of this acquisition, we stated we would reduce worldwide employment (technical difficulty) Open Text and Vignette. We also stated that Open Text and Vignette restructuring charges would be approximately 32 to $40 million and the (technical difficulty) will be recorded in our income statement.

The charge is made up of 26 to $31 million for workforce, 3 to 5 million for facilities and 3 to 4 million for other charges. The cost savings as a result of these actions continue to be in line with our previous estimates as annual run rate savings of approximately 40 to $50 million compared to the combined cost pre-acquisition.

In the last 30 days Moody's Investor Services upgraded Open Text's (inaudible) secure loan facilities from BA2 to BA1 and Standard & Poor's raised the issue level rating from double BB+ to BBB- which is investment grade.

Now (technical difficulty) pre-tax adjusted operating margin model. We are confident in our plan to maintain expenses in the 14 to 15% range for development, 24 to 26% range for sales and marketing, 9 to 10% for G&A and 2% for depreciation. Our annual operating net margin is projected to be in the range of 22 to 27%. Now I'll turn the call over to John.

Thank you, Paul. Hello, everyone, and thank you for joining us today. I am pleased that we remained on target for our revenue and profit goals but was a little disappointed with our license sales.

License revenue decreased approximately $2.7 million in the quarter. The main impact on license sales related to our WCM products. As I mentioned before, some of our customers have delayed purchase decisions until they see the new roadmap for WCM capabilities capabilities.

Additionally, license revenue in North America came in slightly below expectations. On a positive note, Europe exceeded their targets for the quarter. The core ECM business pipeline has grown stronger, being driven by compliance based on solutions in verticals like government, energy and financial services.

As we wait for the (inaudible) business to return, I believe we have more than enough in the pipeline to make up for last quarter's shortfall throughout the rest of the year. In Q1, North America was responsible for 51% in revenue, Europe 43% with the remaining 6% coming from Asia Pacific. We saw strength in Europe driven by the government sector.

In Q1, we saw license revenue broken down by vertical (technical difficulty) manufacturing, 15% from financial services, 24% for government and 11% for energy. Of this license revenue, approximately 30% came from new customers and 70% from our installed base.

Taking a closer look at the transactions in the quarter, we had six transactions over $0.5 million, an additional three transactions over $1 million, with notable wins in energy and the European government sectors. The average transaction size was approximately $320,000 which is about the same as in prior quarters.

Examples of significant wins in the quarter included [voice paper], one of the largest family-owned enterprises in Europe. They purchased additional licenses of Open Text Document Access for SAP solutions and Open Text Email Management for Microsoft Exchange.

Open Text has been a VoIP ECM platform partner for several years, delivering seamless integration with SAP and helping to increase efficiency and productivity. (technical difficulty) world leading gas and engineering company purchased additional license for our Open Text Document Access and archiving for SAP. The British government also signed a number of significant transactions in the quarter.

From a sales operation standpoint, we closed the quarter with a combined salesforce of over 345 quota carrying sales execs. License revenues from partner to resellers was approximately 42% in the quarter. SAP continues to be our largest partner with Oracle and Microsoft continuing to report increasing partner demand for solutions in archiving, records management and compliance.

Speaking of SAP, in the quarter we announced another expansion of our reseller agreement with SAP. They will now resell Open Text Extended ECM for SAP. SAP was already reselling Open Text Document Access and archiving and invoice management solutions.

On the product side, Open Text released to Vignette's Content Management Version 8 and Vignette Portal Version 8 in the second half of 2009. In the coming months, Open Text will launch an offering that combines key strengths of Web solutions with the Vignette Content Management platform, making it the clear market and technology leader for Web content management solutions.

We also announced the latest new release of Open Text Email Management for Microsoft Exchange, a full-featured e-mail management solution that helps companies reduce the e-mail storage requirements and enhances their ability to respond to e-discovery requests.

Also in the quarter, we announced that Open Text is positioned in the leader's quadrant of Gartner's 2009 Magic Quadrant for Web Content Management, based on an evaluation of the Company's ability to execute on its completeness of vision. We also received the highest rating possible in their MarketScope for records management.

On the event side, we are hosting our Content World Conference in Florida this week. To date, we have over 1200 users and partners attending the event. As Greg mentioned, we are holding an analyst day on site tomorrow, on Wednesday October, 28.

At the conference, we will present a detailed product roadmap and outline of our product integration strategies. The PowerPoint materials that accompany these presentations will be made available in the investor relations section of our website on Wednesday afternoon.

Regarding the Vignette acquisition, everything is on track and looks -- we're very pleased with the results to date. The combined product line provides users with a full set of features, but easy-to-use, fast-to-deploy Web publishing applications to a full integrated enterprise class e-business platform for large-scale deployments. Turning now to the outlook for FY 10.

Industry analysts continue to tell us that IT spend will be anywhere from negative 3 to negative 10%. And we still believe we can lead the ECM market in Europe which is currently in the low to mid single digit range.

Taking a look at fiscal 2010, I feel comfortable that we will see license revenue growing in this range from our organic business. As Paul outlined last quarter, we expect Vignette license revenue to decline 30 to 40% and their customer support revenues to decline slightly this year.

Taking this into account, we still expect the overall revenue in fiscal 2010 to be in line with current First Call consensus estimates. I should also add that as a combined company, our revenue seasonality trends in the coming year should be similar to the seasonality we experienced in fiscal 2009.

From a profitability standpoint, we are on model with our 22 to 27% adjusted operating margin model and we're comfortable with current First Class consensus EPS estimates for fiscal 2010. Now I would like to open the call for questions.

(Operator Instructions) Scott Penner, TD Newcrest.

Just on the license revenue, first of all. I think it's fair to say it was below what most people were expecting. You said soft relative to your own expectations.

I know you don't normally go to this level of detail, but last quarter you had expressed some concern with the state of the pipeline in the Vignette business when you were in the midst of acquiring it. Did that revenue come in line with the 30 to 40% attrition or was it basically below that for the quarter?

No, actually on the Vignette side, we were pretty much right where we expected to be. Most of the shortfall was around our WCM, again with customers kind holding off, waiting to see what the new roadmap would look like as well as we did see a little bit of softness in North America, actually mainly US.

And do you have any -- in talking to your customers, do have expectations that once this roadmap is unveiled at the user conference and gets discussed that that backlog will clear up or any sense of how long it's going to be until people are comfortable?

Yes we do. From some of the major customers that we're talking to, they do -- will feel comfortable in probably the next -- in Q3, we should see things start picking up again as well as we're seeing the backlog in general picking up.

Okay, that's helpful. But, Paul, on the cash flow statement, there's a couple of line items that I just want to be clear of. I think the release -- let me make sure I phrase this right. The $4.4 million release of unrealized gain?

Yes.

Where is the income item on the income statement?

That is grouped with other income. So it's below our adjusted earnings and I don't include that in our adjusted earnings.

Okay and the realized gain on the financial instrument, that is in reference to the collar?

Actually that's in reference to our -- no, our collar is actually in our interest expense. But we do some forward Canadian dollar hedging and so that is actually a gain on those forward hedges. It's also in other income. The marked to market piece actually was $1 million and it's netted in -- that was a gain. It's netted in the interest expense line.

Fair enough. And just, John, lastly, any more details on the -- you talked about the European government deal. Just what exactly they are -- what exactly they are rolling out and how much of a reference customer this could be?

It is the British government, it's a very good reference account. Unfortunately it's an area that we can't talk about.

Tom Liston, Versant Partners.

Hi, thank you and good afternoon. John, just with the SAP and extended ECM, could you give us some -- the details are a little bit sparse I guess right now, at least what we have come across. Can you tell us a little bit more about what that involves? Is it similar to your other agreements in the past with SAP? Is there anything specific in terms of geographies and such that maybe (inaudible) conflict and the like?

No; actually, Tom, it is on a global basis for them. We are working very closely together to make sure there isn't any channel conflict, which we think it will not be. And it allows them to sell more of the traditional document management, records management as well as the connection to SAP.

And so we have been working probably six months on this, making sure there isn't channel conflict, doing joint account planning, etc. And we feel very comfortable that this will be significant for both parties.

Okay and sorry to make you go through it again, Paul, but in my mind, there's a few things missing from the cash flow between the four and a half-ish or whatever it was quarter to the 27 you have got to. Obviously there's the Vignette peace. But Vignette, they are -- I think it was only in the $20 million range. Can you kind of walk through how you got the 27 normalized type number?

Sure, I'll start with the DSO, Tom. The effect on the -- although you point out the receivables but it is five days. So the Vignette DSO is much higher than Open Text. Open Text (inaudible) would have been 53.

Because with the Vignette DSO included taking us to 58, those five days accounts for $12 million. That's just a timing. We'll get the DSO's in line as we have in previous acquisitions over the next two quarters. So the effect of those five days is 12 and then (technical difficulty) cash outflow of the $18 million specialty charges that we show in their P&L, so they're one-time charges.

And the rest of special charges, are they -- of 18.6 -- are they related to Vignette as well? Or are some of those Captaris and other things that you are doing?

(technical difficulty) related to Vignette and Open Text together as you know now with our combined restructuring charge and a little bit het from Captaris, yes.

Richard Tse, National Bank Financial.

In terms of Scott's question earlier, is this going to involve sunsetting of the existing WCM products that you're going to talk about over the next few days or -- in terms of the roadmap, can you give us a bit of color at least before the event starts?

Actually, I think I mentioned last quarter, basically the RedDot product which was the existing product is very user friendly, easy to use, install and easy to use for non-technical people. One of the things we will be doing is using the front end of that to help in the Vignette user front end of that product. The Vignette product is a very robust, strong e-commerce product. Many small and medium-size companies would never need the functionality of that. So we will continue to sell both pieces of the products.

Okay and then when you talked about you're comfortable with the First Call numbers and then you sort of look at the pickup potentially from the WCM side of the business, I am assuming that is in your numbers or that would be sort of over and above here?

That's in the numbers.

Okay, so you're assuming (technical difficulty) pickup in Q3?

Right, Q3 and Q4.

Right and in terms of the partnerships, there's been some chatter here that you're looking to sort of replicate what you're doing with SAP on the Oracle side. Can you give us some maybe commentary on that side?

On the Oracle side, we are seeing -- we just had the Oracle rollout in San Francisco. We're seeing some very positive signs. As you may know, we just hired one of the senior members of the Oracle ECM team to actually head up our Oracle team. So we were very happy to see that relationship picking up as well.

Just one final one with respect to the government of Ontario win recently. When can we expect to see some revenue pickup from that side?

My guess would be probably Q3, Q4 and then kind of ongoing as they start deploying from there on.

Paul Steep, Scotia Capital.

Really hard to hear you with the static, so I will make it fast. The first one is just, John, if I heard you right here, on the maintenance support, it sounded like you expected just a small hit on Vignette.

That sounds different than prior deals where you have had a bigger impact and it also sort of goes to the question to Paul. I thought I heard a $9 million purchase price adjustment in the quarter but I want to make sure that's right too.

It's Paul. Actually for the maintenance write-down, we will call it, it was actually 0.9, so just under $1 million. And to your former question, yes. In the valuation of Vignette in this case, the maintenance write-down is not as high as what you might have seen in previous acquisitions such as Captaris, such as Hummingbird.

It has more to do with how the valuation of intangibles was toward the IP. So we didn't have anything to write down in the anticipated (technical difficulty) at the acquisition date. And to that point again (technical difficulty) and frankly only about (technical difficulty)

Sorry, $400,000 in the next three? You literally broke up on the last bit there.

I'm sorry, were at a different site. So I apologize.

No problem.

No, for the balance of the year, over the next three quarters, about an additional $1 million.

Okay, perfect. So that covers that one. The last one for you and then I will move in is just around the tax pools for Vignette. Those are pretty substantive. Has there been any sort of resolution on that as to how you might be able to value those and bring them on maybe as a tax asset or utilize those?

So we have not finished that part of our valuation which we identified. So at this time, this quarter, Q2, we will have completed our evaluation of those [types of] assets. I would anticipate that we will certainly pick up a substantial asset for those operating losses.

Michael Abramsky, RBC Capital Markets.

Yes, thanks very much. Again I apologize as well because I couldn't really hear much on the line. John, what gives you confidence to resume revenue guidance now? Are there macro issues or specific issues?

And could you specifically give us some sense of what is the risk given it's now sort of been a couple of quarters in a row that you've seen some deal slowdown in WCM that the pickup could be pushed out a bit?

I'm sorry, Mike. Some of that cut out. We apologize. We're in a hotel (technical difficulty) there must be something wrong with the speaker line.

But basically from what I think you said was what gives me confidence in the pipeline? We are seeing significant buildup in the pipeline, both in Europe and in North America and in Canada. And so we feel that while the WCM is a little bigger drop-off than we expected when we were planning the new roadmap in Vignette and obviously we think that will pick up in Q3 as we said, we see a healthy pipeline.

And while we're not expecting significant improvements in the economy at a macro level, we are seeing the IT budgets, where they've been cut and cut to a point. But we're still seeing the few projects that are left do include ECM and they are beginning to roll out some of these projects, some of them beginning clearly in the new year.

Okay (multiple speakers)

You cut out a little bit. Did that answer all of your questions?

The other question was what the risk was of the expected pickup in WCM coming being delayed.

I think even if it's delayed, we feel comfortable meeting the Street expectations with other products.

Okay, so you feel you've got good coverage on your outlook.

That's right.

And you are -- it looks like -- and again, perhaps this question has been asked. I apologize, just couldn't hear. But your G&A was a little bit higher than expected. It was about 10% of revenue versus 9.4% in 2009. Can you give us an indication, was that near-term Vignette related or how do we think about the trend going forward? I know you did mention your business model earlier but I just couldn't hear everything.

Yes, Mike; it's Paul. It is actually absolutely near-term Vignette related. We have in the G&A for [back off] usually takes about six months to integrate. So for a period of time, you'll have really kind of an additional G&A line. So you would think of that 100% as just short-term Vignette related.

So are you assuming that that [GM] would return to your normal business model levels in order to achieve the Street EPS guidance?

Yes we are. That's the right assumption.

Dushan Batrovic, CanaccordAdams.

Is it fair to assume with the commentary that the Vignette side is looking to pick up in Q3 and Q4 with the release of the new products? And sounds like from a macro spending standpoint, again seems to be a little more back end weighted. I know you also said seasonality is going to be typical but could we see a bit of a weaker Q2 then just based on the commentary around more of a resurgence in the second half?

The Q2 to date looks pretty healthy. And by the way, on the pickup, it's more that the -- it's not so much the Vignette. It's the RedDot folks are waiting to see what are the implications of Vignette.

It's not so much the Vignette pickup later on, although we do expect to see some of that. The drop-off in our numbers for the last two quarters have been basically for customers waiting to see what's going to happen in the RedDot side.

And so you did say that so far, Q2 was shaping up to be reasonable based on historic standards?

Yes.

On the geography side, it seems like on a quarterly basis, we haven't seen much of a trend between Europe and the US. Is there anything we can say that you have seen longer term that would suggest one region is starting to respond to I guess the recession and spending rebound differently from another region or is it pretty typical based on what you've seen in the past?

It's actually -- it seems it goes in waves. What we saw was first US, then UK, then Germany. Now it's back to the US and actually a little bit in Asia-Pacific we saw this past quarter was down a little bit.

But we see them coming back again this quarter. So it's a little bit, each time there's somebody. Luckily, we are fairly evenly spread. (multiple speakers) even though the US was tough this quarter, it seems as though it's picking up a little bit.

Scott Penner, TD Newcrest.

Just a follow-up. John, I think you had mentioned the releases on Vignette. I think you said V8 of the Content Management and Version 8 of the Portal. In the second half of -- what was it? This fiscal year?

Fiscal year. So, right, we expect it in probably February/March timeframe, I think.

Just to be clear on the strategy here, I mean you mentioned and talked about some problems that Vignette customers were having with previous releases and how that was starting to get a little bit stabilized and now you have the new release coming out. I can recall with Hummingbird, the strategy was to go in and basically fix up the most recent of the old releases before moving people. Is this similar or is this a different strategy just trying to get people to upgrade?

Slightly different, Scott, in that Vignette, their 7.7 I believe had stabilized and affected most of the problems. There were a couple of little cleanups but in general it had stabilized. And so getting people to that 7.7 was the key goal and we're obviously in the process of doing that. So the 10 will actually be new functionality, new features that many of the customers have been looking forward to for quite a while. But the stability is there in the existing product.

Sorry, 10 -- you mean Version 8?

Sorry, Version 8; yes.

Okay, is it a costless migration for Version 5 and 6 customers to move either to 7.7 or straight to 8?

They did incur some costs and we have been trying to minimize that and streamline that so it wouldn't be as expensive as it has been.

Paul Lechem, CIBC World Markets.

Thank you and good evening. Just on the restructuring activities around Vignette, I was wondering could you give us some of the details in terms of when you expect to record further charges and the outlay of cash associated with them?

Yes, the additional charges going through probably the next two quarters will be of a similar size. As you know, we reported between [32 and 40] on our 8-K and this is the first quarter that we've started those charges in. Correspondingly, the cash, about half of the restructuring charges were paid [out of] cash this quarter. Expect the continuing cash outflow would be at a similar level next quarter and then start to taper off Q3, Q4.

Sorry, the first part you said, the charges, you expect to record similar charges for Q1 in the next two quarters?

Yes, that's correct. We charged about half -- we charged just under half of what we said in 8-K (technical difficulty) charges would be for the Vignette Open Text restructuring. So the next would be Q2 and then taper off Q3, Q4.

In terms of the workforce reductions, where are you at in that activity and when do you expect to be completed by?

We're about 50% done. We would expect the rest to be done certainly before the end of the year.

So when do you hope to be at the $40 million annual cost savings run rates?

That would be exiting fiscal 2010.

On the salesforce, I believe, John, you mentioned you were at 345 reps versus 269, if my notes are correct, at the end of last quarter.

That sounds about right.

Is that -- it sounds like a big delta in terms of the number of reps. Is there something you expect to do on the salesforce side? Where would you expect to be? Is there still work to be done in terms of reworking the salesforce?

That's right. There will be a certain areas that we will be looking out for that.

On the SAP agreement, the latest expanded agreement, when would you expect to start to see actual benefits from that? When would you expect to see your revenue pick up from that agreement?

As you know, this quarter is their Q4. So obviously that's usually a healthy quarter for us anyway. But I would certainly see it picking up. Their Q1 is usually kind of less -- one of their weaker quarters. But I certainly think their Q2, our Q4, we should certainly start seeing the benefits from that.

Is their salesforce fully trained now or is that ongoing?

It's ongoing but they have been trained for the past two years. They're actually doing very well.

Okay and lastly just on your comments on your Web content management, you haven't given out any granularity in terms of product breakdown. But I am just trying to get a sense -- you've always -- well not always -- for the last several years, you've talked about e-mail archiving and records management has been the mainstay of business and that's really the driver.

And yet it seems that from your comments now that Web content management is actually quite a significant part of business. Can you give us any sense of magnitude of Web content management versus sort of the core document management, record management, e-mail, archiving that kind of (multiple speakers)

I think what we are beginning to see particularly -- and in fact, I don't know, Paul, if you're down here at the show, if you see our roadmap, we are beginning to see Web 2.0, 3.0 really begin to pick up social computing, mobile computing is of great interest with our customers. So we do see this as an area that will pick up significantly in the coming year.

So is Web content management now -- it's a growing part of your business or how should we think about it in terms of magnitude of the business?

Last two quarters, it has not been. So up until we announced Vignette, it had been a growing part of our business, in fact a fast growing part. And then with the Vignette announcement, it slowed down. For the last two quarters, we do see it -- we expect it to pick up certainly Q3, Q4 and will become an important piece of our business.

How was your core -- license sales from your core ECM business? How would that have been in the quarter? Would that have been down also in the magnitude of the 6% number or was that actually a more stable business in the quarter?

It was down a little bit in North America (inaudible) in Europe, down a little bit in Australia and Asia-Pacific a little bit.

Gabriel Leung, Paradigm Capital.

Just two quick housekeeping questions for you, Paul. First on the tax rate, do you still expect that to sort of end the year at around 26%?

Yes, as I guided last quarter, I think this year you will see it in the 26, 27. As you know, we put it to 27. So I would think by the end of the year, we will be seeing 26.

Secondly, can you talk about how much of the $50 million in cost savings you've realized thus far?

For this quarter, (inaudible) will be minimal. There will be probably under 3 million for this quarter. Again, a lot of the restructuring -- we just acquired Vignette within kind of the first -- Vignette's only (technical difficulty) two months, as I mentioned. So most of the actions we took only happened in the last two months of the quarter. So the savings while minimal this quarter will start to go through the next three quarters and I said the savings should be in place on a exit Q4.

Lastly, John, can you talk about how the -- I guess there was some management transition or restructuring after John Wilkinson departed last quarter. How has that worked out for the Company thus far?

As I think I mentioned last time, John had actually put the new structure in place about a year previously. So the three regional managers, a manager for Europe, a manager for North America, a manager for Asia-Pacific are general managers that have not only sales but professional services and support reporting into them. The feedback from our customers has been very positive and I'm pretty happy with the whole organization.

So you wouldn't say any of the recent license shortfalls related to some of the management transitions that you had?

Certainly not on the management transition, no.

So let's wrap it up at this point. Thank you for your questions. Just to highlight on Q1, we met our revenue and profit goals but fell a little short on our license goals.

We remain positive for the outlook for 2010. The integration with Vignette is on track and doing well. Our partner program continues to support our alignment with SAP, Oracle and Microsoft and we are still focusing on solutions that integrate with these strategic partners. With that, we will conclude the call for today. Thanks everyone for participating and for your questions.

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