BV

Bazaarvoice, Inc. (BV)

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Bazaarvoice (BV)

Q3 2014 Earnings Call

March 04, 2014 4:30 pm ET

Executives

Linda Wells

Eugene Austin - Chief Executive Officer, President and Director

James R. Offerdahl - Chief Financial Officer and Principal Accounting Officer

Analysts

Gregory Dunham - Goldman Sachs Group Inc., Research Division

Jonathan Parker - Morgan Stanley, Research Division

Stephen Ju - Crédit Suisse AG, Research Division

Mark R. Murphy - Piper Jaffray Companies, Research Division

Brendan Barnicle - Pacific Crest Securities, Inc., Research Division

Nandan Amladi - Deutsche Bank AG, Research Division

Presentation

Operator

Good day, and welcome to the Bazaarvoice Fiscal Third Quarter 2014 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Linda Wells, Director of Investor Relations. Please go ahead.

Linda Wells

Good afternoon, and welcome to today's conference call to discuss Bazaarvoice's financial results for the third fiscal quarter of 2014 ended January 31, 2014. I'm joined today by Gene Austin, our Chief Executive Officer and President; and Jim Offerdahl, our Chief Financial Officer.

Following the remarks from Gene and Jim, we'll have a question-and-answer session. Please note that we are simultaneously webcasting this call on our Investor Relations website at investors.bazaarvoice.com. The earnings release of our results for the third fiscal quarter of 2014 was issued earlier today and is also posted on our Investor Relations website.

Please remember that certain statements made during this call, including those concerning the business outlook and guidance, growth plans and opportunities, potential acquisitions, outlook on legal matters, sales execution and our ability to capitalize on our opportunities are all forward-looking statements. Forward-looking statements are subject to a number of risks, uncertainties and assumptions that are described in our SEC filings, including the Risk Factor section of our Form 10-K for the fiscal year ended April 30, 2013; our Form 10-Q for the second fiscal quarter 2014; and our form S-1 filed with the SEC on July 12, 2012, as well as other documents that we may file with the SEC in the future.

Should any of these -- the risks or uncertainties materialize, or should any of our assumptions prove to be incorrect, actual results could differ materially and adversely from those anticipated or implied in these forward-looking statements.

In addition, forward-looking statements are based on currently available information and we undertake no duty to update this information. Additional cautionary language regarding these forward-looking statements is further described in today's press release.

Finally, some of the numbers that we will discuss during this call will be presented on a non-GAAP basis. Today's press release, together with the accompanying tables, contains the calculations of these non-GAAP financial measures and a full reconciliation between each non-GAAP measure and its corresponding GAAP measure.

I would now like to turn the call over the Gene.

Eugene Austin

Thank you, Linda, and thanks to all of you for joining us on today's call. The third quarter was an eventful quarter for Bazaarvoice, as we successfully transitioned to a new CEO and completed another chapter in the lawsuit filed by the Department of Justice.

At the same time, I was pleased with the overall progress we made in executing our business as we produced our highest sales quarter of the year, drove strong new client growth, greatly improved our dollar churn and exceeded both our revenue and earnings guidance.

Today I will provide you all with the latest update on the DOJ process, as well as review our financial results for the third quarter and highlight the operational improvements we have made across the organization.

We were disappointed and frustrated by the court's decision in the DOJ case. However, despite the result, we have transitioned to the remedy stage of the litigation. As you may know, on February 12, the DOJ filed a proposed motion for judgment calling for a wide range of actions, including among other things, a divestiture of the PowerReviews business. Earlier today, we filed our opposition to the DOJ's brief. In terms of next steps, as noted in the court's scheduling order for the remedy phase, the DOJ's reply brief is due by March 12 and a remedy hearing is scheduled for April 2. In light of the potential outcomes discussed in the briefs, we have been in discussions with potential divestiture buyers of PowerReviews and have received significant interest from multiple parties. In the event that we divest the PowerReviews business, we are hopeful that we will quickly be able to reach an agreement on terms acceptable to the potential divestiture buyer, the court and us.

At the same time, we are evaluating whether to appeal the ruling, and that decision will depend, in large part, on the outcome of the remedy phase of the trial.

I want to reassure our investors that we have the right leadership team in place to both manage a successful remedy in our lawsuit, as well as drive improved overall execution in our business. While the possibility of divestiture would require some of management's time to oversee a successful transition of customers to a new organization, I am confident that we can do so in a timely manner. Regardless of the final remedy, we remain steadfast in our focus on improving our operating metrics and increasing the company's overall growth trajectory.

We commented on our last earnings call that while growth was our top priority, we wanted to make progress towards profitability and positive cash flow in fiscal year 2015. Now, should we move forward with the divestiture of the PowerReviews business, our progress on profitability and operating cash flow could be pushed out. That being said, I want to stress the fact that our business has made steady progress during the last 3 quarters that I have been with Bazaarvoice and we are still on track to resume accelerating top line revenue growth some time in fiscal 2015.

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