Original Source: FD (FAIR DISCLOSURE) WIRE
. Kenn Goldman, Siebel Systems, Inc., SVP, Finance and Administration & CFO . Tom Siebel, Siebel Systems, Inc., Chairman & CEO . David Schmaier, Siebel Systems, Inc., EVP
Delivered a good quarter, above the range of guidance as well as the avg. and virtually all analyst estimates. Total revenues were down about 7%. Operating income came in at $56m, up dramatically from the adjusted numbers of $16m for 3Q. Q&A Focus: Guidance, demand, acquisition strategy, Capex, OnDemand, Home Depot, and deals.
A. Key Data From Call 1. 4Q03 total revenues = $367m. 2. 4Q03 EPS = $0.08.
S1. Opening Comments (T.S.) 1. Overview: 1. In 2H03, the co. clearly moved on a more offensive footing in the CRM market.
2. In the course of the year, SEBL doubled down on CRM. 3. In the last two quarters the co. reintroduced the CRM for everyone's strategy, launched the User Group in October, and clearly communicated the co.'s strategy to establish, maintain, penetrate and grow in virtually all aspects of the CRM market. 4. Announced products for companies of all sizes, all verticals, all markets, and all geographic markets. 5. Strategy is to continue to expand the leadership position in this market. 6. Introduced the CRM OnDemand product offering, which the co. brings to market globally with IBM. 7. Acquisitions: 1. Announced a very significant partnership with DT to bring the hosted products to market in the UK. 2. Announced the acquisition of UpShot, a hosted CRM pioneer.
3. Announced acquisition of Motiva. 4. This week announced the acquisition of a co. called Ineto. 8. In 4Q03, the co. saw significantly improved IT environment in the quarter. 1. As a result the co. realized solid results across the board. 9. Had a number of key wins at Home Depot, Telstra, DirecTV, MCI.
10. License Agreements: 1. In the course of the quarter SEBL concluded 42 license agreements in excess of $1m, up from 19 in 3Q.
2. Concluded five licensing transactions in excess of $5m, up
from $3m in 3Q. 3. Saw very solid performance in the Asia-Pacific group, generating over $30m in license revenue with significant wins at Telstra, Westpac and Vodafone. 4. Saw exceptional performance from Europe and the EMEA group, generating over $50m in license revenue with very significant wins at South African Revenue Service, DHL,
Roche, Nokia. 11. Realize some significant growth in a couple of exciting markets. 1. In the course of the year, particularly the Universal Application Network market and Analytics. 2. Analytics market growth accelerated in 2H. 3. As of 4Q, Analytics has become the co.'s second largest product line. 4. Closed over 60 licensing transactions in the course of the quarter.
5. Now the co. has over 360 customers around the world. 6. Some of 4Q transactions were interesting. 1. Proctor & Gamble selected SEBL Analytics and Enterprise Analytics. 2. This includes that is well beyond CRM. 3. Analytics is a core component of the work the co. is doing at Citizenship and Immigration in Canada. 4. Universal Application Network continues to be increasingly exciting on the market. 5. Today the co. has 47 customers and six, seven live in
production. 6. Concluded 16 transactions in 4Q, four of which were in excess of $1m in license revenue. 7. In 2Q the co. did one deal over $1m, in 3Q, three transactions over $1m. 8. Two transactions that were very significant associated with Universal Application Network in the US, include MCI and Vodafone. 7. Public Sector: 1. Continues to be a very rapidly growing market force. 2. Today the co. has over 175 customers globally in the public sector, and some of these systems that the co. is deploying include, Citizenship and Immigration in Canada, South Africa Revenue Service, the Social Security Administration in Spain, the City of New York, 311 Systems, and Welfare Systems in the UK. 3. South African Revenue Service, there were some significant follow-on business in 4Q. 4. Putting this into perspective, this has to do with integrating Legacy Applications, and the systems that they deploy there is what they call the 360-degree view of the taxpayer. 5. They sign an initial license agreement in 2H of September 2003. 6. Started to work in first week of October and went live on Nov. 16. 7. Since September 16th they had a system that unified their value-added tax system, business tax system, personal tax system, customs system, and two others and the economic benefits that the government of South Africa is realizing. 2. Summary: 1. The co. realized significant benefit from an improved IT environment in 4Q. 2. Under any circumstances it is clear that the co. is positioned to realize very significant increases in profitability. 3. If the economy continues to grow, the co. is well positioned to benefit differentially from that growth.
S2. Financial Results (K.G.) 1. Highlights: 1. The numbers reported today fully comply with GAAP. 2. There are no adjustments, restructurings or other activity that separate from the numbers. 3. Therefore, these are GAAP numbers relative to 4Q. 4. In 2002 and 2003, the co. did take a number of restructuring steps. 5. SEBL was successful in reducing headcount, consolidating facilities and tightening controls in all discretionary spending. 6. Maintained a cash positive business and set for itself a great foundation to go into '04. 2. Numbers: 1. License total revenue EPS, very consistent with the numbers provided on Jan. 5. 2. License revenue at $150m is above the guidance provided originally of $120-140m, in assessments that existed at the time of about $132m. 3. Total revenues at $367m, up about $2m from what was suggested
on Jan. 5, and up from the guidance provided of $335-355m in
earnings. 4. EPS of $0.08 is up from the guidance provided, in line with the $0.08 suggested on Jan. 5. 3. 4Q03 vs. 4Q02:
1. Total revenues were down about 7%. 2. License down about 5%. 3. QtoQ, license revenues were up 36%, far in excess of what was seen before in terms of 3Q and 4Q seasonality. 4. Operating income came in at $56m, up dramatically from the adjusted numbers of $16m for 3Q, $29m for 4Q02. 1. The numbers for the prior periods do not include restructuring charges, would be up absolutely a lot more if the restructuring charges were included. 5. Net income YoverY was up 77%. 6. QtoQ sequentially, it was almost 160%.
7. EPS up 60% YoverY, 167% QtoQ. 4. More Detail: 1. Total revenues up $45m from 3Q. 1. $40m of that was in license. 2. License revenues grew to $150m or up about 36%. 3. Total service revenues, up at $5m. 1. Service revenues include CRM OnDemand, that's where the co. is including that business, but it was not material for the
quarter. 4. Maintenance revenue drove the growth. 5. Maintenance revenues increased $7.5m sequentially from 3Q to $117.5m.
6. Seeing excellent renewals. 1. In light of the renewals, the co. is seeing an uptick in both 4Q and 1Q. 7. Global services achieved $99m for the quarter, down modestly $2.4m, 3Q to 4Q.
8. In 1Q04, the co. expects this to still go down a little bit
more, relative to the less number of work days that it will
see in services in 1Q. 9. After that, the co. is going to focus on growing that business again and that will be one of its major initiatives in '04. 10. Operating Income: 1. Operating income was $56m for 4Q, up a strong $40m from 3Q, best performance in seven quarters. 2. Mid-term operating target of 15%, the co. did achieve that 15% ahead of schedule in 4Q03. 11. Comparing '03 vs. '02, co. saved over $100m in salary-related costs, such as compensation on travel, entertainment, and payroll taxes.
12. In addition to that, the co. saved money in facilities, $10m
in money and depreciation, a major impact there. 13. In 4Q, total expenses, including cost of sales as well as operating expenses were down $55m from 4Q02 1. $55m of 4Q03 expenses down vis-a-vis 4Q02. 14. SEBL exceeded its previously-stated goal of achieving $30m per quarter in cost savings by 4Q of this year.
1. Very close to achieving the $40m target put up for 2H04 in
this past quarter. 15. Net income came in at $42m, up 157% from $25m in 3Q. 16. Tax rates remain at 36%, unchanged. 17. EPS came in at $0.08. 1. That takes into account the 543m fully diluted shares that went up because of the avg. stock price for the quarter, up $0.05 from 3Q. 18. In terms of FX, effectively neutral to profitability. 1. Total revenues did increase about 4% in total from the currencies. 2. Sequentially, the impact on revenues is up about 1.6%. 3. The expensing impact was negative 3%.
4. In total, a very modest, positive impact, a neutral impact on profitability. 19. In terms of verticals, communications continue to be the largest area in total, followed by financial services.
1. Public sector had a strong quarter as well as Life Sciences.
20. In terms of product-by-product, service remained number one.
1. Analytics took the number two spot as well as SFA. 2. Also saw increases in UAN. 21. 4Q reflected a very strong quarter for Analytics, by the fact that Analytics is now Number 2. 5. Geographic Distribution: 1. …