Saba Software, Inc. (SABA)

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Saba Software, Inc. (SABA)

F1Q10 Earnings Call

September 24, 2009 5:00 pm ET

Executives

Bill Slater – Chief Financial Officer

Bobby Yazdani – Chairman & Chief Executive Officer

Analysts

Eric Martinuzzi – Craig-Hallum

Kevin Liu – B. Riley & Co.

Presentation

Operator

Welcome to the Saba Software first quarter 2010 earnings release. (Operator instructions) I would now like to turn the conference over to Saba’s Chief Financial Officer, Mr. Bill Slater.

Bill Slater

Thank you for attending Saba Software’s first quarter fiscal 2010 conference call. With me today is Chairman and Chief Executive Officer, Bobby Yazdani. If you have not yet received today’s earnings release, you may download it at www.saba.com.

During the course of this conference call, we will be making forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, including statements regarding Saba's future performance and financial projections, Saba’s belief that first quarter professional service revenues hit a bottom, Saba’s promising relationship with IBM including a growing pipeline and Saba’s ability to complete major deals with IBM, Saba’s growing momentum, Saba’s ability to execute against its key growth strategies, and Saba’s ability to profitability grow its business.

These statements are based solely on information available to us today, reflect management’s current expectations and beliefs, and are subject to numerous risks and uncertainties. It is important to note that our actual results could differ materially from such forward-looking statements.

The company disclaims any intention or obligation to update or revise any forward-looking statement whether as a result of new information, future events, or otherwise. Information concerning factors that could cause actual results to differ materially from those in forward-looking statements is contained in our annual report on Form 10-K for the year ended May 31, 2009, and similar disclosures in subsequent Saba periodic reports. Copies of these reports may be obtained from the SEC.

In addition, we intend to discuss today both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP results is included with the financial statements accompanying our earnings release. Saba's management believes that non-GAAP information is an additional meaningful measure of operating performance because it measures the principal operating results that can be directly influenced by management and provides more consistent comparability to our financial results against historical results and the reported results of other comparable companies.

I will now turn the call over to Bobby Yazdani, Chairman and Chief Executive Officer of Saba Software.

Bobby Yazdani

Thank you and good afternoon everyone. In today’s call, I will cover our first quarter performance and significant milestones we achieved during the first quarter and our expectations for fiscal year 2010. I will then turn the call over to Bill who will provide details on our first quarter financials.

Let’s start with first quarter highlights. Fiscal first quarter revenue was $25.8 million, up 2% compared to $25.3 million in the same period of the prior year. License and on-demand revenue from sales of our unified people management solutions during the quarter were $11 million, a significant increase of 39% from the first quarter of the prior year. The impact of the growth in our product revenues was partially offset by lower professional services revenues. As with many of our peers, services engagements tapered off during summer as some companies deferred or reduced the size of their projects. We anticipate this to be a bottom for professional services revenue.

Gross margins improved to 65% in the first quarter of fiscal 2010 and recurring revenue for license updates and product support and on-demand services accounted for over 54% of the company’s total revenue. Our GAAP EPS improved to $0.03 per share on a fully diluted basis compared to a loss of $0.08 in the same period last year. Our non-GAAP EPS improved to $0.07 per share on a fully diluted basis compared with break even a year ago.

Bill will give you more details about the first quarter in the call later. I’d now like to elaborate on some of the major accomplishments in the first quarter. We added 20 new enterprise customers and expanded existing relationships with a number of organizations worldwide, including American Red Cross, Ampli-Phone, Briggs and Stratton, Cisco, Deloitte, Internal Revenue Service, Kraft, and the US Army. We also continued to improve our customer success metrics around both on-demand as well as license customers.

Our success with both new and existing customers has solidified our position as a clear leader and market standard in enterprise learning, with the highest market share in this space. Customers like HP and Cisco with complex, highly demanding requirements have not only selected Saba as their global learning standard, they are now also standardized on Saba for performance and talent management as part of a unified solution for people management. During the first quarter, we won a significant project at Cisco to deploy our entire people management suite. This win reflects the strength and completeness of our people management suite.

And Gartner Group again positioned Saba as the clear leader in its 2009 Magic Quadrant for corporate learning systems. This validation coupled with our strength and market momentum in the performance and talent management space reinforces our confidence in our ability to lead across the entire unified people management spectrum. Winning major deals for unified people management solutions, while meeting customer demand from one vendor that can provide a complete standardized solution across the people management spectrum, serves to validate our strategy.

Read the rest of this transcript for free on seekingalpha.com