Vignette Corp. Q4 2008 Earnings Call Transcript

Feb. 3.09 | About: Vignette Corp (VIGN)

Vignette Corp. (VIGN) Q4 2008 Earnings Call February 3, 2009 5:00 PM ET

Executives

Michael Aviles - President and Chief Executive Officer

Patrick Kelly - Chief Financial Officer

Dave Dutch - Senior Vice President Products and Marketing

Jennifer Baker - Investor Relations Manager

Analysts

Nathan Schneiderman - Roth Capital Partners

Scott Berg - ThinkEquity Partners

Mark Schappel - The Benchmark Company

Brian Murphy - Sidoti & Co.

Operator

Good afternoon. My name is Marcello and I will be your conference Operator today. At this time I would like to welcome everyone to the Vignette Q4 conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a Q-and-A session. (Operator Instructions)

I will now turn the call over to Ms. Jennifer Baker, Investor Relations Manager. Ms. Baker you may begin.

Jennifer Baker

Thank you, Marcello. Good afternoon and welcome to Vignette’s fourth quarter 2008 financial results conference call. I’m joined by Michael Aviles, President and CEO; Pat Kelly, our Chief Financial Officer and Dave Dutch, Senior Vice President Products and Marketing, who is available for questions during the Q-and-A session.

I’ll begin today by reading our required risk disclosure statement. Our comments today may include forward-looking statements related to Vignette that involve risk and uncertainty, including but not limited to quarterly fluctuations and results, management of growth, market acceptance of certain products, integration of acquisitions, general economic conditions and other risks.

These risks are discussed in the company’s Form 10-K, and in our quarterly reports filed from time to time with the Securities and Exchange Commission. Please be cautioned the forward-looking statements are not guarantees of future performance and actual results may differ materially from management’s expectations. In addition, unfavorable changes in economic conditions may affect the company’s current expectations.

Furthermore, our discussion includes certain non-GAAP financial measures in an effort to provide additional financial information to investors. All non-GAAP measures have been reconciled to their related GAAP measures in accordance with SEC rules. Such reconciliation is included with our results and is in our earnings press release available on our website as well as in the Form 8-K filed with the SEC.

I will now turn the call over to Mike.

Michael Aviles

Thank you, Jennifer. Good afternoon and thank you for joining the Vignette Q4 ‘08 earnings call. We are exploring a new approach to these calls. We posted this script about an hour ago on our website. For today Patrick Kelly and I will read through the script and take your questions at the end. In the future we are exploring the option of posting the script in advance and then starting the call with some summary statements before moving straight into Q-and-A. We want to make this a productive use of time for everyone.

I’ll start today’s call with a few summary comments and then turn it over to Pat; the details around our financial results. I will then return with some additional comments on ‘08 and ‘09.

Let’s face it, 2008 was a challenging year. It was tough for Vignette and tough for the global economy. Despite the challenges, Vignette was able to demonstrate management control by delivering operating profit and positive cash flow for the year while making some important progress in key areas of our business.

As we look forward to 2009, the marketplace is obviously disrupted and full of economic

uncertainty. This could affect our financial performance. We will have to manage through it carefully by planning conservatively, investing prudently and making the necessary operational adjustments along the way in an effort to maintain profitability and positive cash flow for the coming fiscal year.

However not all disruption is negative. We believe that 2009 offers opportunities to address some fundamental challenges in our business as we work to restore license revenue growth. We also believe the recent Autonomy acquisition of Interwoven may beat our advantage throughout the year. Now let me turn the call over to Pat to walk through the full year and Q4 results.

Patrick Kelly

Thanks Mike. For the fourth quarter, total revenues were $37.2 million, down 29.4% from Q4 of last year. License revenue for the quarter was $7.3 million and represented 19.5% of total revenue. We had two large deals in excess of $1 million during the quarter. During the quarter our average sales price for all deals was $156,000, that’s versus $191,000 in the third quarter.

The economy clearly affected our ability to close business in the quarter as we had a number of large opportunities that slipped out of the quarter or were put on indefinite hold. Total services revenue decreased by about $4.7 million or 13.6% over Q4 last year and breaking that down into the two components.

First of all, Professional services revenues totaled $10.7 million; that was down 23.7% from Q4 2007 and down 21.9% from Q3 2008. This decrease is due primarily to lower amounts of services projects as a consequence of the lower license revenue throughout the past year with the remainder due to a stronger dollar versus last year and versus Q3 2008.

Maintenance revenues totaled $18.9 million this quarter, and they were down 8.2% from Q4 2007 and down 7.1% sequentially from Q3 2008. The vast majority of this revenue decline can be explained by a stronger dollar versus last year and Q3 2008 with the remainder due to lower license revenue throughout the past year. Maintenance renewals continue to be between 85% and 90%. Revenue generated from our international operations represented 37% of total revenue during Q4 and that’s versus 39% in Q3 2008 and 32% in Q4 of last year.

In total, our operating expenses were down $6.8 million or 21% from Q4 2007. This was largely driven by lower sales and marketing expense as well as declines in R&D and G&A costs.

Sales and marketing expenses decreased $6.5 million or 35% from Q4 2007. This decrease is due to the headcount reductions taken in Q3 and Q4 2008, lower commissions due to lower license revenue and also lower expenses due to foreign currency movements in Q3 and Q4 2008. R&D decreased slightly about $900,000 or 12% from Q4 2007 and G&A decreased $600,000 or 13% from Q4 2007.

Included in our Q4 2008 GAAP costs is $1.3 million dollars in restructuring costs related to employee separations, as the company took action in December to reduce the overall cost structure. Other income is down slightly from last year’s trend due to lower cash balances and falling interest rates. After other income and taxes, our GAAP loss was $229,000 or $0.01 per share.

After non-GAAP adjustments, our non-GAAP net income was $2.2 million or $0.09 per share. The adjustments we make for GAAP to non-GAAP are given in a special table in our press release. Key items are amortization of intangibles and acquired technology, stock option expense, restructuring expenses and other one-time events.

Turning now to the full-year results, total revenue was $169.5 million and that’s down 11.6% from the prior year. On a GAAP basis, for the full year we incurred a net loss of $6.3 million or $0.27 per share on a fully diluted basis.

The decrease in year-over-year income was primarily driven by lower operating margins and the $7.4 million deferred tax credit adjustment taken in Q4 2007. On a non-GAAP basis, for the full year 2008 our net income was $7.0 million or $0.29 per share on a fully diluted basis.

Our cash and investments remained strong at the end of the quarter at $139 million, which is down $4.9 million from the end of the Q3 ‘08 period and down $36.4 million from the end of the Q4 2007 period.

$3.2 million of the decline in cash balances versus the third quarter was due to revaluation of foreign cash balances at stronger US dollar rates. We retain some cash balances in the UK and Australia where we have significant operations and both of those currencies weakened significantly versus the dollar in Q4 2008. During the quarter, we also used approximately $1.1 million of cash flow from operations.

The primary driver to the year-over-year decline in the balance of cash and investments was $33.5 million of cash that was used for the share buyback program and $7.0 million in cash was used to finance the acquisition of Vidavee. During the year, we generated approximately $8 million of cash flow from operations. DSOs decreased from 61 in Q3 to 60 in Q4. Total headcount was 643 at the end of the quarter, decreasing 24 from both last quarter and from last year.

Now I’ll turn the call back over to Mike for some more detailed commentary.

Michael Aviles

Thanks Pat. I’d like to now discuss some additional information surrounding our efforts in 2008 and our plans for 2009. Despite challenges, Vignette made noticeable progress in key areas in 2008. In the products area we delivered nine new product releases and 10 product upgrades. These product releases balanced innovations in social media and web experience optimization with the introduction of new features to enhance the customer experience.

In support of social media innovation, we released Vignette Community Services and Vignette Community Applications. Our web experience optimization leadership was evident with Vignette Recommendations, which was named Best New Web 2.0 Technology by Incisive Media. Recommendations in our Vignette video services also represent our first on demand offerings to the market.

Our focus on industry specific products is supported by releases such as Vignette Media 7.0 which delivers a unique solution for the communications, media and entertainment sectors. Vignette Content Management 7.6 was released in Q4 ‘08. It included numerous customer centric upgrades and simplified the administration and deployment of the product.

Vignette’s product innovation was recognized by the industry in 2008. In addition to our award for Vignette Recommendations, KMWorld honored Vignette for the fifth consecutive year by naming Vignette Business Integration Studio as one of its trend setting products of 2008. Our leadership in the market was validated when the fifth annual eContent 100 named Vignette one of the companies that matters most in the digital content industry.

We also had a good year in terms of customer successes. More than 30 of our customers won awards in 2008 and we are proud to be the brand that brings their content to life. Here are two examples of the awards. Our customer, the US Department of Labor, was included in the top 10 government agency information technologies for its site that provides access to benefits for more than 1,000 federal and state administered programs. Also, two of the top 10 intranet sites ranked by the Nielson Norman Group are powered by Vignette. The Nielson Norman group ranks the top intranets based on usability and design.

Despite the progress that we made, there were several issues that impacted our performance in 2008 such as intense competition and general economic conditions. Some of these were outside of our control. Others, such as improving and modernizing our sales and marketing, were within our control.

In previous earnings calls we discussed efforts that we took to reallocate and adjust investments. Towards the ends of ‘08 we took additional action to target a 10% reduction in our overall costs year-over-year. These moves included a reduction in force and a cutback in certain discretionary expenses. These actions, along with other operational adjustments allowed us to deliver operating profits and positive cash flow during fiscal 2008.

So what can we expect as we look forward into 2009? First of all, the market opportunity is there for us to grow our business. IDC stated that content management software spend, will be $4.6 billion worldwide in 2009, with a projected compound annual growth rate of 10.2% over the next five years.

Gartner stated that software for the management of images and video is the fastest growing segments of the content management market with just 44% of enterprises having such products today, but 22% intending to install it in 2009. The market for our products is present and growing.

Internally, we will continue to focus energy and our investments to improve our overall go-to-market. We have identified several areas of focus for 2009. The first is lead management. Quality leads are fuel for the sales force. We are in the process of implementing lead management best practices such as lead scoring, systematic routing, and the use of online tactics to pull in prospects.

This will improve lead generation by enabling Vignette and the sales force to (a) recognize where customers and prospects are in the sales process; (b) communicate with them based on their behavior and implicit needs; and (c) yield quantifiable predictable demand creation. We will concentrate on online marketing campaigns throughout 2009 and on-ground events will be scaled back to put more money into online pan regional lead generation activities.

The second area of focus is sales enablement. Starting in October of ‘08 we took specific actions around market segmentation, territory design and sales force productivity. We underwent a data driven and comprehensive exercise to define and segment our target audience and focus our investments around major metropolitan markets. We took action to increase quota carrying investments and reduce non-quota carrying investments throughout the field.

A new prescriptive and proven sales methodology has been implemented to help our sales force sell strategically, conceptually and consistently. We have also invested in a sales force automation tool that will provide the systematic workflow and data visibility to measure and track our success in lead management. We combined all these efforts with attractive quota and compensation plans that we believe will allow us to retain and attract top field talent.

The third area is channel optimization. We completed a slimily detailed analysis of our channel program and are expanding our use of partners to cover geographic and industry segments that are outside the territories of our field representatives. We are enabling and empowering our partners to be effective extensions of the Vignette sales force.

This enablement covers three areas: A comprehensive technical enablement program that helps our partners build strong technical skills around our solutions; a flexible sales enablement program that combines online learning and sales workshops to help our channel partners build strong business development skills around our key solutions; and lastly, a continuation of our ongoing investment in our partner extranet to ensure we have a single repository of sales information, white papers and best practices.

We will continue to build on the existing resellers we have developed in our international business. This will enable us to address new markets and provide strong local support for our customers across sales, implementation and post sales activities. We are also expanding North America partner focus from referral business development to reseller.

Our product development in 2009 includes investments around providing non-technical users with the ability to easily manage and update their content. There is a concerted effort to improve the speed and simplicity of implementation. Our aim is to build revenue streams in high growth markets that complement our core web content management business. This includes social media and web experience optimization.

We are also investing on the INW front as we continue to enhance our business to channel programs, industry focus and product improvements. In regard to pricing, we introduced two simplified pricing bundles around our WCM product suite in Q4.

On the corporate development front, we have a solid balance sheet which allows us to continue our path for growth and consider M&A activity. We will be selective when it comes to acquisitions. We have implemented a discipline around the evaluation of potential M&A opportunities and we intend to maintain that discipline. Past opportunities that were deemed too expensive may become more reasonable from a valuation perspective. Areas of interest include opportunities we can build on core markets and expand into adjacent markets in addition to opportunities to expand our geographical or vertical reach.

I will now turn the call back over to Pat who will discuss a change in our approach to guidance.

Patrick Kelly

Thanks Mike. The following comments reflect our outlook today February 3, 2009 and include forward looking statements subject to the risks we outlined earlier in the Risk Disclosure Statement. Vignette is not obligated to update guidance during the quarter and if we do so it will be in a public statement.

Given the impact that the ongoing uncertainty in the economy can have on our business, we are going to suspend giving detailed quarterly guidance in 2009. Instead, we plan to provide directional annual guidance for key elements of the P&L, but not specifically for total revenue or EPS metrics. We will continue to strive to grow license revenue in 2009, but now we expect that due to foreign currency movements in our lower level of license revenue in 2008 that we will see reduced levels of services revenue in 2009.

In the full year 2009, license revenue is expected to be flat to up 20% year-over-year. Maintenance revenue is expected to decline up to 10% year-over-year. Professional services revenue is expected to decline up to 20% year-over-year. To maintain positive cash flow from operations and positive non-GAAP operating income, we have already taken action to reduce our cost and will continue to monitor the revenue outlook to maintain a balance between revenue and investment.

Operating expenses are expected to decrease up to 10% year-over-year. We expect to be profitable and cash flow positive for the year. We expect to earn modest profit at non-GAAP operating and non-GAAP net income levels for the year. We expect that our results will experience some fluctuation from quarter-to-quarter and that generally results will improve as the year progresses.

Now, let me turn the call back to Marcello who will open the line for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Nathan Schneiderman - Roth Capital Partners.

Nathan Schneiderman - Roth Capital Partners

A handful of questions for you here; one is, I hope you can share with us. I understand your desire not to get overly specific in the guidance because we are seeing that from a number of companies, but I am struggling with the idea that license could actually be flat to up 20%. So can you talk us through this?

What’s the scenario for actually achieving that? Are you assuming that the second half of the year could be massively positive comp, because I assume you expect revenue licenses to be down sequentially in the first quarter, but correct me if I’m wrong there.

Patrick Kelly

Yes, so I guess we said Nate that we do expect generally results to improve throughout the year. So I guess you can take an implication from that. We do think that at the level we are, we have an opportunity to grow license revenue this year. We really do not feel that our performance was strong in 2008. We think that a lot of things we are doing are going to lead to higher productivity of sales and marketing and so we believe that we should be able to maintain and potentially grow license revenue this year.

Nathan Schneiderman - Roth Capital Partners

I understand you don’t want to get overly specific on Q1, but is it fair to say that you expect traditional seasonality of a reasonably steep decline sequentially in licensees?

Patrick Kelly

Yes, I think it’s fair to say we don’t think seasonality has gone away altogether.

Nathan Schneiderman - Roth Capital Partners

Can you talk about this one time adjustment of $1.8 million, the accrual adjustment and what exactly was that and where does it show up on the income statement? Because I saw you have it as an add-back but just can you clarify what that is?

Patrick Kelly

That was a good guy in other income on our GAAP results and really was an adjustment to a balance sheet item that reached back many years and was something that we had on the balance sheet and after doing quite a bit of analysis believed that we should make that adjustment now. Because it didn’t have to do with the operating results of this period we excluded that good guy from our non-GAAP results.

Nathan Schneiderman - Roth Capital Partners

Okay. Can you walk us through more of the details on your headcount plans from 2009 and just as you mentioned the 10% headcount reduction, to what extent is that reflected already in the 643 number of employees that you ended the year with or how much of that is yet to come here?

Patrick Kelly

Most of that is reflected already. There is some additional that sort of flowed into Q1, but most of that should be reflected. I think our cost reduction year over year, the 10%, the bulk of it; a vast majority of it is either related to employee costs, employment costs or subcontractors that we use on some of our professional services business. So that’s almost 90%. Then of course, we’ve taken a pretty hard look at miscellaneous items like travel and other non-employment costs.

Michael Aviles

Nate, another thing to keep in mind throughout the year is in that 643 numbers that you recited, that does not include our India operations which in ‘08 are outsourced through a contractor. In Q3 of ‘08 we announced that we will be transitioning that to an in-source operation and taking on those contractors as full-time employees to Vignette. So in the year you will see some of that mix in the head count. So overall the head count through the year will stay steady or decline; however, the number of actual employees for Vignette will actually increase.

Nathan Schneiderman - Roth Capital Partners

Okay and just a final question on a comment that you made related to the guidance; just could you clarify what you mean by modest profitability on a non-GAAP. Do you mean that you expect to be barely profitable for the year?

Patrick Kelly

Yes, let me add a little color to that. I think without putting a number on it, what we are trying to do; we are not trying to make a lot of money in 2009. We want to continue investing for the long-term, investing to grow the business, but at the same time we are determined to be cash flow positive and profitable. So that’s sort of the balancing act that we have got going on. Obviously there’s a lot of uncertainty in the business, but we are not trying to put up big numbers on the bottom line, we are trying to invest as much as we can in growth and still be cash flow positive and profitable.

Nathan Schneiderman - Roth Capital Partners

Okay, and then just to follow-up on that, given that you expect improvements through the year, that would tend to imply you’ll be negative during the first half and positive the second half? Is that the right way to think about it and thank you very much.

Patrick Kelly

Yes, I don’t want to get real specific on exactly the bottom line that we see in the first half and the second half. I’ll leave that for you to build the model around.

Operator

Your next question comes from Scott Berg - ThinkEquity.

Scott Berg - ThinkEquity Partners

A couple of questions; first one, on the income statement here, was there some one-time items in interest and other that was higher sequentially throughout the year?

Patrick Kelly

Yes, obviously you’re looking at the GAAP income statement. This relates to, similar to the question that Nate asked about this one-time adjustment that we had in Q4, $1.9 million. So there were a couple things that drove other income to be a bit positive in Q4 that we would not expect to continue. One was this one-time accrual adjustment of $1.9 million and the other was foreign currency gains that we actually had in Q4 of about $500,000. So those two things we would not expect to continue going forward.

Scott Berg - ThinkEquity Partners

That reconciles the difference that I have. On the Interwoven sale, obviously that’s kind of a big deal in your space and I know that Pat and I have had a chance to discuss it a little bit. I know it’s early but have you seen any impact on any of your sales calls on it so far, any commentary around it?

Michael Aviles

Scott, I’ll make a comment and then Dave is itching to talk about that transaction, so I’ll give him some time with it as well. People always ask about iWove, iWove, and I think iWove over the last few years has been going after a different market somewhat than we have and in particular from what we understand, done very well in the compliance and in the legal area. That’s something we don’t do a lot of business in, so we don’t see much of them there.

As far as Q1 is concerned it’s still too early too tell. So I think there’s going to be certainly an opportunity in the marketplace today. Any time an acquisition like this is announced certain things are put in play and they are put in play with regard to the customers, the partners and the employees of the affected companies. Dave.

Dave Dutch

Yes Scott, because I do think it’s still early into this as far as when the announcement was made public but I really think it does strengthen our position as the independent leader of web content management and we are hearing a lot of chatter and buzz in the marketplace. As Mike mentioned, in even the most perfect acquisitions there are frictions between the two companies and I think Autonomy has been very public about their focus on the legal government regulatory and compliance; any discovery areas which is not web content management.

So I think we are very bullish about this. I think there is a lot of discussion with customers, prospects, the partner channels. We build our channels out. I think that speaks well to that and I think it’s a great opportunity for us and we’ll definitely leverage that going forward.

Scott Berg - ThinkEquity Partners

I knew it was early, but just curious to see what the commentary was. With regards to your 2009 initiatives, I understand where a lot of them have been or why a lot of them are around sales execution. I know it’s been a challenging 12 to 18 months for you guys. Some of these initiatives look like they’ve been implemented now for a couple of three, four months. Have you seen any positive impact since they have been implemented?

Michael Aviles

Yes. Don’t misread my comments. I said starting in October of ‘08. If you remember, Scott, back in October of ‘08 we announced that there was a change in the sales leadership where Alex Shootman who’s our head of global sales and services left the business and I chose not to replace that position. We basically restructured global sales and services having the GO GMs, the geographical general managers reporting directly to me.

Then there were some other changes we did because that role was big in scope with regard to VPS Professional Services and then the maintenance side of the business to basically allocate out the revenue responsibility amongst several members of the senior leadership team, my direct reports.

Actually, during Q3 we started to look at some stuff around major metropolitan markets, started the first parts of market segmentation, continued that work through Q4 and then it was really in January that we started implementing a lot of those changes, particularly around market segmentation, territory design, allocating some more investment from non-quota carrying to quota carrying, rolled out the sales methodology program and a whole new structure around partners.

So starting it now, initial indications internally is that it is being well received and the fruit will be in the pudding.

Scott Berg - ThinkEquity Partners

I can understand that and we will all see the results here coming up, that’s for sure. All right, then my last question is around the average sales price. I see that it’s been declining sequentially throughout the year. Is that a result of customers just buying less total modules and components to the package or there is something else behind it?

Michael Aviles

I’m sorry Scott; I didn’t catch the full question.

Scott Berg - ThinkEquity Partners

Sure. Your average sales price looks like it’s been declining at a fairly healthy rate throughout the year. Has that been more related to customers just buying less total modules in different pieces of all the products or is it related to something else?

Patrick Kelly

So Scott, I’m not sure it is exactly what you asked about there in terms of customers buying fewer modules. I do think that we’ve seen both a shift in mix of deals and also just average sales price of deals within certain categories coming down. Then in addition to that we’ve added three SAS products and those tend to have lower ASP as well.

As we step back and look at this, we think about it, and big deals are really great and we continue to do big deals, but clearly we can’t live on the mega deal flow alone. So we are building our business to thrive on a higher productivity from each of our sales reps.

We have put together our coverage model based on lower ASP than we’ve experienced historically, our channel efforts, our lead generation management processes; they are all similarly designed to generate a higher volume of leads and higher volume of deals. So we do believe the ASP has shifted downward and we intend to grow our business and be more productive and more profitable by generating more deals per sales rep.

Operator

(Operator Instructions) Your next question comes from Mark Schappel - Benchmark Company.

Mark Schappel - The Benchmark Company

Mike, regarding the weakness in the quarter and the weakness in some of the services guidance going forward, is that being felt on the traditional web content management business or is that more on the work flow and imaging side of the business?

Michael Aviles

I think it is across the entire business, Mark. I think it’s safe to say that we are feeling that. Imaging and work flows, that business is a little bit different than the web business, different sales cycle, different buyers, different transactions, size of transactions, tends to be very lumpy, big lumpy. So in ‘08 we weren’t pleased with any part of the business but I&W was equally disappointing. So we are seeing a little bit of that in both ends of the market, I wouldn’t push it to one versus the other.

Mark Schappel - The Benchmark Company

Okay, and there has been a lot of talk about social media products in the area of web content management, and you guys had the offering come out, I believe it was last quarter, the Vignette Community application. Was revenue meaningful or is it a little bit too early yet to tell here in the social media products?

Michael Aviles

It is a little too early to tell. However, relatively speaking, we were pleased with the traction that we are getting and the attention we are getting in this area in terms of deals that we are able to close quickly as well as pipeline that’s building for us and it is a source of differentiation for us. So we are excited about it. Dave I’m sure has got some comments on it as well.

Dave Dutch

Yes Mark, I think it is hard nowadays to go out and talk about web content management without talking about social media and optimization. So we are seeing that as a good thing for us because content is still king, but you have to deliver it through a social media platform and we have both those things. So I think early returns are very encouraging where we are investing our resources.

Mark Schappel - The Benchmark Company

Okay, then one final question for Pat. Pat, if you could just give us the foreign exchange impact on the top line in the quarter.

Patrick Kelly

So if I look at the various lines of revenue Mark, the biggest impact was on maintenance revenue. Where if I look at sequentially, basically all of the decline in our maintenance revenue, the vast majority of it can be explained by foreign currency.

In professional services it was a much less significant impact, probably more on the order of 20% and then in license revenue, foreign currency was a pretty significant impact. Then when I add everything together it’s about $2.7 million, almost $3 million in foreign currency impact in the quarter sequentially.

Operator

Your next question comes from the line of Brian Murphy - Sidoti & Co.

Brian Murphy - Sidoti & Co.

Thanks for taking my question. Pat, could you tell us what percentage of license revenue came from new customers?

Patrick Kelly

So we haven’t broken that out specifically Brian. Actually, I guess everything was lower than we wanted it to be, but in terms of the mix of new customers, a reasonably healthy mix of new versus existing customers.

Michael Aviles

And consistent with prior quarters.

Brian Murphy - Sidoti & Co.

Regarding the change in your coverage model, is that designed to better reach new customers or would you say you’re focusing more on the installed base and growing license revenue with existing customers?

Michael Aviles

So, the answer is both. So it’s meant to get deeper into territories and then also to give partners a compelling reason to be aligned with Vignette where they can go attack markets. So a lot of what we are doing both from a sales, marketing and product perspective is around new customer acquisition.

So that what we are doing in the territory design is really meant to get a lot more focus in the different markets that we want to go direct in, as well as more focus and attention on the markets outside of these major metropolitan areas to service existing accounts as well as acquire new ones.

Brian Murphy - Sidoti & Co.

Is it fair to assume Mike, that you’re also becoming more focused on particular verticals?

Michael Aviles

The vertical story is still an important one. As we develop it at Vignette and in particular, for example, gosh, let me ask about it. Before I it was Mark about the NGW 9W business and as we look at the I&W business, there’s certain vertical markets that we are a little more focused on like healthcare, insurance, financial services and public sector. So Vignette as a whole does a fair amount of its business in the financial services industry, telco, media and entertainment, so all these vertical markets are important to us. You are going to continue to see more focus from a sales, a marketing and a product perspective around that vertical expertise.

Brian Murphy - Sidoti & Co.

And some of the deals that you saw slip out of the quarter, were they disproportionately in any particular vertical or was it sort of across the board?

Michael Aviles

It was sort of across the board.

Brian Murphy - Sidoti & Co.

Okay and just last one Pat. What was Cap-Ex for the quarter?

Patrick Kelly

Cap-Ex was about $600,000.

Brian Murphy - Sidoti & Co.

$600,000. Just thinking about maintenance Cap-Ex for the business; I think just the past couple of years you guys were running at about $3.5 million. This year you finished a lot lower than that. We had some maintenance Cap-Ex level here and what do you expect that to be going forward?

Patrick Kelly

Well, one exception to that for next year is going to be this in-sourcing we are doing in India. So we are building out an office to accommodate 175 employees in India and so that is driving a bit more Cap-Ex than we have seen in 2008 or 2007. So I would say that the level we’ve seen in 2008 is a reasonable level going forward with the exception of that build out and that build out’s going to cost us between $2 million and $2.5 million.

Operator

(Operator Instructions) It appears that at this time we have no further questions. Gentlemen, do you have any final comments you’d like to make?

Michael Aviles

Yes. Thank you, Marcello. Thank you everyone again for joining our call. 2009 will be an interesting year. We are committed to keeping our balance sheet strong while improving our core businesses and maintaining positive cash flow for the full fiscal year. We believe that 2009 provides us with an opportunity to address some fundamental challenges and we are taking specific and measurable steps to improve our go-to-market through focused sales, marketing and product initiatives.

So thanks again for your time and we look forward to updating you on our progress throughout the year. Bye-bye now.

Operator

This does conclude the Vignette Q4 2008 conference call. We thank you for your participation and you are now free to disconnect.

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