TIBCO had strong growth in Q2. Q2 was the 10th consecutive quarter in which TIMCO's EPS grew 20 percent over the same period the prior year. Even if there is a dramatic decline in the business environment, it believes it can still deliver 15 to 20 percent EPS growth going forward.
In Q2, TIBCO acquired LogLogic,
which provides TIBCO with a new ability to ingest and
interpret log files for use in risk, security, operational
intelligence and fraud applications. The impact of the LogLogic
acquisition probably won't be felt until next year.
In Q2, TIBCO also signed new logos and partners, and improved its balance sheet and domestic cash. It held a number of regional marketing conferences with impressive attendance (far more than expected) and impressive demand.
TIBCO explains its consistent growth as follows:
1. It is not seeing the same shutdown in spending that it saw in 2008 and 2009. Big deals are not drying up and companies are willing to fund big technology when there is value. Big deals may be even more justifiable than small deals because they can make a difference to the company's performance. TIBCO sees a lot of opportunity and feels it hasn't been taking advantage of all of the opportunity for these deals.
3. Demand for event-driven infrastructure applications has never been greater. TIBCO offers an integrated assembly of everything needed for delivering event-driven applications and the two-second advantage. For instance, TIBCO Loyalty Lab, a cloud-based loyalty platform, has 260 million loyalty users, an increase of 120 percent in the last 12 months. In the last year, TIBCO added 8 different retail categories to Loyalty Lab. It also added Spotfire, BusinessEvents, and master data management. As a result of these additions, TIBCO is delivering next-generation real-time intelligence platforms for some of the fastest-growing retailers in the country. The same infrastructure platform is also event-enabling global supply chains, and improving risk management and reducing fraud.
Financials.
The strengthening of the U.S. dollar materially impacted TIBCO's results for the quarter. It expects a 5 to 6 percent currency headwind in Q3 and a larger impact on earnings per share than the $.03 in Q2.
On a constant currency basis, total revenue increased 20 percent and license revenue increased 17 percent in Q2. In Q2, in actual dollar terms, TIBCO had 137 deals with over $100,000 in license revenue and 20 deals in over $1 million in license revenue. The average deal size was $620,000 versus $630,000 a year ago. TIBCO's top 10 customers comprise 19 percent of its revenue versus 21 percent a year ago.
TIBCO saw 40 percent revenue growth in the Asia-Pacific/Japan region. A lot of customers in those regions are facing highly competitive markets and are looking to TIBCO to create new services models and streamline processes. In Q2, revenues in the Americas increased by 17 percent and revenues in Europe increased by 4 percent. Year to date, revenues have increased by 13 percent in the Americas, 22 percent in Europe, and 27 percent in Asia. TIBCO has not been executing well in the United States, but hopes to be back to where it should be by Q3 or Q4.
By business industries, revenues in healthcare increased 400 percent, manufacturing grew 92 percent, life sciences grew by 57 percent, consumer products grew 50 percent and retail grew 21 percent.
In product segments, business process management (BPM) and collaborative technologies had the best quarter in quite some time. BPM grew by 80 percent, driven by ActiveMatrix (AMX) BPM sales. Service-oriented architecture (SOA) increased by 14 percent. Business optimization increased only marginally but was still a key factor in most of TIBCO's major deals. Spotfire showed less growth in Q2 than in Q1, but has strong pipeline growth and had a strong 2011, making it more difficult to improve year-over-year. Further, Spotfire deals that TIBCO thought would close in Q2 actually closed in Q1. BusinessEvents declined in Q2, but still played a central role in enabling many of TIBCO's infrastructure applications. BusinessEvents still remains a key differentiator for TIBCO.
For Q3, TIBCO expects constant currency growth in revenues to be 17 to 22 percent and constant currency license revenue growth of 13 to 22 percent. The range on license and total revenue growth is broader than normal because of uncertainties concerning currencies.
Non-GAAP gross margins were 74
percent, the same as last year. Non-GAAP operating income increased
by 22 percent (or 35 percent on a constant currency basis) and
resulted in a non-GAAP operating margin of 25 percent. In Q3, TIBCO
expects non-GAAP operating margins to be 25 to 26 percent.
Non-GAAP earnings per share was $.26 in Q2 versus $.21 in Q2/2011. The negative currency impact on earnings per share was $.03. Non-GAAP EPS has increased 26 percent for the first half of the year. In Q3, TIBCO expects non-GAAP earnings per share to be $.25 to .27 and expects a negative currency impact of $.03.
Cash flow from operations in Q2 totalled $75.8 million.
Deferred revenue increased 12 percent (or 19 percent on a constant currency basis). During Q2, TIBCO spent $121 million in share repurchases and bought back approximately $3.6 million shares.
The full transcript of the earnings conference call can be found on Seeking Alpha at the following link:
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