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Envivio, Inc. (ENVI)

F2Q14 Earnings Conference Call

September 4, 2013 5:00 PM ET

Executives

Alice Kousoum – Investor Relations

Julien Signès – President, Chief Executive Officer and Co-Founder

Erik Miller – Chief Financial Officer

Analysts

William Morrison – Oppenheimer & Co. Inc.

Presentation

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Envivio Second Quarter 2014 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for question. (Operator Instructions) This conference is being recorded today, Wednesday, September, 4, 2013.

I would now like to turn the conference over to Alice Kousoum of Investor Relations. Please go ahead, ma’am.

Alice Kousoum

Thank you, Sheryl. Good afternoon and welcome to Envivio’s second quarter fiscal 2014 financial results conference call. Joining the call today are Julien Signès, President and CEO; and Erik Miller, CFO. The agenda of today’s call includes commentary from Julien, followed by discussion of the financial results from Erik. This afternoon, Envivio issued a press release announcing its second quarter financial results, which is available on the company’s website at envivio.com. This call is being broadcast live over the Internet and the audio of this call will be available on the Investor Relations page of the company’s website.

I’d like to remind everyone that this conference call will contain forward-looking statements that are not historical facts, but rather are based on the company’s current expectations and beliefs. Such forward-looking statements are not a guarantee of performance and Envivio’s actual results may differ materially from these forward-looking statements. Several factors that could cause or contribute to such differences are described in detail in the Risk Factors and other sections of our SEC filings as well as with our earnings release.

Envivio undertakes no obligation to publicly release or otherwise disclose the results of any revision to these forward-looking statements that may be made as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. In addition, today’s discussion includes non-GAAP financial measures that Envivio believes may be important to investors as a metric to assess the operating performance of its business. Reconciliations to the most directly comparable GAAP financial measures are included in a table attached to the earnings release on Envivio’s website.

And now, I’d like to introduce Julien Signès.

Julien Signès

Thank you, Alice. Joining me today on the call is Erik Miller, Envivio’s Chief Financial Officer. We are encouraged with our results this quarter. Revenue for the second fiscal quarter was $11.5 million, up 55% sequentially and 7% year-over-year. Our strong sequential revenue results were driven by large orders from two tier 1 cable customers in the United States, including one new customer.

In the quarter, new tier 1 customer contributed 30.2% of revenue and our existing tier 1 cable customer contributed 18.9%. Revenue from the Americas was $6.2 million, compared to $2.6 million in the prior quarter and $3.5 million in the second quarter of the prior year. Additionally, an existing tier 1 European customer contributed 13.4% of revenue in the quarter. We attribute this quarter’s improved results to both the changes we made to our North America sales organization beginning in fiscal Q4 of last year and the compelling differentiation of our unique products.

We’re encouraged by the pipeline for upcoming projects with both new and existing customers, and increased interest in software-based solutions. We also had solid gross margins in the quarter of over 68%, up from 63% in Q1 and 62% in the prior year. The increase in gross margins was driven by the high volume of software license orders we received from our two tier 1 cable customers, who are deploying our products on data center blade servers.

We see our improved execution and recent changes in our sales organization, resulting in more customer engagements and increased sales pipeline, including a number of tier 1 content and service providers in North America and internationally. However, I would like to note the timing and extent of large projects we may receive from these engagements could cause our revenue and gross margin to fluctuate on a quarterly basis.

Now turning to some of our customer highlights. This quarter, one of our customer wins including a leading pay TV operator and content provider in Europe. On solutions we placed part of their previous, legacy hover-based TV system with an end-to-end software-based solution that supports both the existing HD and SD TV service as well as streaming to Internet connected devices. This new customer visiting our converged headend solutions for the satellite and cable channels while simultaneously creating outputs for the voice mobile solutions they require.

In China, Qinhuandao Broadcast Network, part of the Hebei Broadcast Network Group selected our Muse encoding software to power the new video services. The services include multi-screen and time-shifted TV that offer the HD and SD video channels to connected TVs, set-top boxes, PCs, tablets and mobile phones. In fact, the flexibility of our solution to support services from HD TV to mobile and the cost savings that our solution generate, were crucial in the customers’ selection of Envivio.

And in Ukraine, VOLIA, the country number one pay TV operator, selected our new transcoder for its new over-the-top Internet TV services. Our new transcoders offer them flexibility to integrate their pay TV and OTT platforms and allow them to serve a large number of viewers around the country who want to enjoy a more personalized anytime, anywhere TV experience.

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