Chordiant Software Inc. F2Q09 (Qtr End 31/03/09) Earnings Call Transcript

| About: Chordiant Software (CHRD)

Chordiant Software Inc. (CHRD) F2Q09 (Qtr End 31/03/09) Earnings Call May 7, 2009 5:00 PM ET

Executives

Steve Springsteel - Chairman, President and Chief Executive Officer

Peter Norman - Vice President & Chief Financial Officer

Analysts

Derrick Wood - Wedbush Morgan Securities

Kevin Liu - B. Riley & Company

Meg Whitman - JMP Securities

Operator

Good afternoon, ladies and gentlemen, thanks for standing by. Welcome to Chordiant Software second quarter 2009 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 questions. (Operator Instructions). This conference is being recorded Thursday, May 7, 2009.

I would now turn the conference over to Pete Norman, CFO. Please go ahead sir.

Peter Norman

Good afternoon. I’m Pete Norman, Vice President and Chief Financial Officer of Chordiant Software. Thank you for joining us today to review our results for the second quarter of fiscal 2009. On the call with me today is Steve Springsteel, our Chairman, President and CEO.

We’ll begin with prepared comments from management and then we will open the call up for questions. By now, you should have a copy of the press release issued by the company this afternoon after the close of the market. You can find a copy of this release on our website at www.chordiant.com. A replay of this conference call can also be reached through the Investor Relations section of the company’s website.

The information in today’s conference call will include historical information and forward-looking statements, including guidance about our business that involves risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements.

Forward-looking statements are generally identified by words such as believe, may, expect, should, plan, guidance, projection and similar expressions. Further information on potential factors that could affect our financial results is included in Chordiant’s most recent SEC filings. We assume no obligation to update guidance or other forward-looking statements.

In addition, non-GAAP financial measures and the most directly comparable Generally Accepted Accounting Principles or GAAP financial measures may be discussed on this webcast. Chordiant continues to provide all information in accordance with GAAP and does not suggest or believe that non-GAAP financial measures should be considered as the substitute for, or superior to measures of financial performance prepared in accordance with GAAP.

Chordiant believes that these non-GAAP financial measures provide meaningful supplemental information regarding its operating results primarily because they exclude amount such as the expense for non-cash equity-based compensation, restructuring and other infrequent charges, the non-cash tax expense related to net operating loss carry forward and the amortization of purchased intangible assets.

The company does not consider these items a part of ongoing operating results when assessing the performance of the company. We believe that our non-GAAP financial measures also facilitate the comparison of results for current period with the results for past period. Please visit the Investor Relations section of our website for more information regarding the non-GAAP financial measures discussed on this webcast.

Now, I’ll turn the call over to our Chairman, President and CEO, Steve Springsteel. Steve.

Steve Springsteel

Thanks, Pete. Good afternoon, everyone and thank you for joining us today. I’ll briefly discuss our results for the second quarter of fiscal 2009, and then I’ll discuss our view of the current market condition and how Chordiant is positioned in the current environment. Pete will then discuss the second quarter financial results in more detail as well as our outlook for the reminder of fiscal 2009. I‘ll wrap up with some concluding comments and then we’ll open the call up for questions.

Although we had a challenging bookings quarter due to the fact that some larger deals had slipped out of the quarter, I’m pleased that since March 31 we have already closed one multimillion dollar transaction in North America.

We did, however generate positive cash flow from operations in the second quarter of $3.4 million and on the year-to-date basis positive cash flow from operations of $6.1million. We continue to see solid performance in our maintenance renewals which remain in the greater than 90% levels on both the dollar basis and in absolute number of renewals.

This past quarter, we signed a large multi-year maintenance and support agreement with one of our large financial services customers, which is typical of the commitment and long term investment in Chordiant Solutions that we continue to see from our customer base.

Revenue for the second quarter was $18 million, slightly below our internal projection due to the aforementioned large transaction that’s slipped out of the second quarter, but was subsequently closed in the current third quarter.

The Vodafone roll out of our products is going well. For the fourth quarter in a row, we have received orders from Vodafone ahead of their contractual commitment. At March 31, they have placed orders for approximately 10 countries and have successfully deployed and are in live production in three of those countries.

We continue to control our operating expenses then they were down for the third quarter in a row. Second quarter expenses were down 19% as compared to the first quarter. Some of the expense reduction can be attributed to lower commissions in other sales related expenses, as well as lower audit and professional services fees associated with our year-end audit activity.

In addition, we are managing our head count with the goal of increasing operational efficiency. The loss in the second fiscal quarter is our first quarterly non-GAAP net loss in two years. As the aforementioned slip transaction closed in the second quarter, as we had internally forecasted our two year quarterly profit trend would have continued.

At the end of March, we had over $53 million of cash, deferred revenue was approximately $36 million and our overall balance sheet continues to remain healthy. Backlog at quarter end was approximately $45 million.

Now, I’d like to give you an update on what we are seeing in the market. Similar to what we saw last quarter, the software spending environment continues to be very challenging. The predominant theme that we have seen over the past few quarters continues to be that our potential customers’ biggest requirements for any investment is a quick time to ROI. If the customer experience market in particular, we are seeing a renewed focus on customer retention. Customers and our target markets are looking at ways to enhance their investments in technology that directly impacts the customer experience.

Our suite of decisioning solutions gets at the heart of improving the customer experience. From a macro environment perspective, what we saw in calendar Q4 or our fiscal Q1 was a dramatic drop in bookings as companies were hit with hard economic headwind. During that quarter companies were primarily focused on cost cutting measures. During the last quarter that we have just completed, we saw customers finalizing their budgets for the New Year and beginning to move projects and purchases through the more vigorous spaces of spending improvable processes that are now required.

With that said, we are now beginning to see possible signs that IT budgets are starting to freeze. Although we aren’t yet willing to say that we are seeing a turnaround in the macro economy, we are beginning to see move that project spending approvals as evidenced by the good start to our current quarter. This makes us cautiously optimistic going forward.

We continue to invest in our world class products to ensure that Chordiant maintains its competitive advantage. We believe that our installed base is a competitive advantage for Chordiant especially in tough times such as these, and we continue to announce products that enhance the solutions that our customers haven’t solved. We will continue to manage through this downturn in the market and to invest that a prudent level to ensure that our products remain cutting edge.

During this past quarter, we announced enhancements to our existing solutions such as Chordiant Marketing Director, Chordiant Decision Management and Chordiant Recommendation Advisor. We were excited to announce that general availability of our customer experience, Visual Business Director or CxVBD which is the new business simulation application that provides real time visibility into the actual and potential success of various customer interaction strategies.

Unlike traditional CRM solution, CxVBD enables companies to simulate and control the business impact of customer experience strategies in a dynamic and comprehensive manner. On the partner front with IBM, this quarter we completed validation of our decision management software for IBM’s service provider delivery framework which is an open, scalable, flexible SOA-based architecture. In order for it to be validated we went through a rigorous assessment to ensure that our solutions qualify as a next-generation, open-standards-based environment.

This framework is targeted at the communications industry and is a blueprint for delivering superior customer service. IBM has stated that the Chordiant Solutions included as part of its framework will deliver a real business value to communication providers and will help reduce churn, which is a critical issue facing providers today.

We just announced this week the general availability of Chordiant connector for IBM WebSphere Process Server or WPS. The combination of Chordiant’s customer experience solution with IBM, WPS will enable companies to seamlessly orchestrate live customer interaction management with back-end enterprise wide processes and work management. This will allow Call Center and retail agents to initiate and manage processes during a customer conversation without switching desktop applications.

As you may recall, last quarter we announced the availability of Chordiant Decision Management, Recommendation Advisor an Enterprise Foundation on IBM System z/OS. This quarter we have focused our efforts on training the IBM go-to-market teams and driving early stage pipeline. As a result we have trained over 150 IBM System z sales personnel and have a number of early stage pipeline transactions that we are jointly pursuing.

As we’ve seen in the past few quarters, we continue to see solid demand for application products as Z have brought a lower ASP and a quicker time to value. We continue to believe there is a significant opportunity with our existing customer base for follow-on sales of these types of solutions, and consequently we have seen demand for these products increase nicely over the last few quarters. This is evidenced by the fact that these opportunities now represent a major portion of our pipeline.

During the second quarter, we closed transactions with such notable companies as CIBC, Swiss Bank and Lloyd’s. In our financial services customer, we continue to see merger and acquisition activity. As in the past we believe that this may present an opportunity for Chordiant to become one of the strategic integration platforms as companies emerged. This is evidenced by the pipeline growth we have seen for expansion of existing customers that have recently acquired other entity.

As we announced last quarter, Orange UK expanded the use of Chordiant Decision Management Recommendation Advisor to improve the customer experience across multiple customer touch points. This quarter we have just completed a joint case study with Orange, where they have shared from very impressive results from deploying Chordiant solution. They are now retaining an additional 4% of their most valuable customers each month, which translates into an approximate $3 million increase in their gross operating margin per month.

This is a great example of how our technology drives significant ROI. Our overall pipeline remains strong, and I believe that our pipeline trends indicate that the demand for our solutions continues to be solid. However the timing of transactions will continue to be extremely difficult to predict over the forthcoming quarters, and on the people front we are pleased to announce that Marchai Bruchey has joined Chordiant as our Vice President and Chief Marketing Officer.

Marchai, joins Chordiant after leaving KANA Software where Steve was Chief Marketing Officer and was responsible for our corporate marketing, product marketing, field marketing and global alliances. Prior to KANA, she served under variety of executive sales and marketing positions at Digital Equipment. In a short time that Marchai has being with us, she has made a significant positive impact and we are glad to have around the Chordiant team.

Although the overall markets remain challenging, we believe that we are starting to see some modest early signs that budgets are beginning to free up. While we do not anticipate any type of significant improvement in the market near term, we are cautiously optimistic that the second half of this fiscal year will see improved market condition.

With that, I’ll now turn call over to Pete Norman, our Chief Financial Officer for a deeper dive into the second quarter financials and our thoughts going forward. Pete.

Peter Norman

Thanks Steve. As Steve noted it was a challenging quarter on the bookings front. Bookings for the second quarter of the fiscal year exclude Vodafone activity and were $8.4 million unfavorably impacted by a delay in the signing of several book ship transactions.

Since March 31, more than $2 million of these orders have subsequently been closed. As a result of the delays in orders, revenues for the second quarter were $18 million. As of March 31, 2009, total backlog aggregated $44.6 million compared to the $55.6 million at the end of the last quarter. Total backlog includes the remaining Vodafone contractual commitments, our deferred revenue balances that appear on our balance sheet and committed statements of work for professional services.

Looking at the total $11 million decline in backlog for the quarter, approximately $1.3 million for the change was caused by foreign exchange rate changes, primarily driven by the fluctuation in the value of the euro. In addition there were two significant components that resulted in a lower backlog of license revenues at the end of the quarter. The first being approximately $800,000 of Vodafone revenues that were recognized against their commitment, and the second being approximately $3.5 million of revenue taken on previously deferred contracts.

For the deferred service revenue, there were three significant components driving the change. The first being hourly work that was completed during the quarter and applied against existing statements of work. The second being the recognition of revenue on multi-year support and maintenance contracts, and the third being adjustment of approximately $1.4 million relating to unutilized statements of work primarily associated with the project that was cancelled during the period. Our $8.4 million of reported booking has been reduced by this $1.4 million and would have been $9.8 million without this adjustment.

With respect to Vodafone, we once again received an order during the second quarter that was priced in advanced of the required date stipulated in our agreements. As a result in the quarter approximately $800,000 of Vodafone license revenues was recognized. To-date, we have recognized $17.9 million of total license revenues from the Vodafone contract.

Using the March 31 euro to U.S. dollar exchange rates, the remaining minimum contractual commitments under the Vodafone agreement, combined with existing deferred support amount would produce approximately $4.2 million of additional license revenues and $1.5 million of additional support revenues in fiscal 2009 and another $1.5 million of support revenues in fiscal 2010. Amounts ultimately recognized may differ due to any future changes in the U.S. dollar to euro exchange rates.

Our aggregate, $36.4 million deferred revenue balance at March 31, 2009 decreased approximately $6.7 million from the $43.1 million balance at the end of the prior quarter. Again, changes in foreign exchange rates caused more than $600,000 of this different.

As of March 31, we have three accounts with more than $1 million in deferred license revenue. This revenue is expected to be recognized in future periods. Of the $36.4 million in total deferred revenue, approximately $6 million or 16% of the balance relates to license fees and the majority of the remaining 84% is associated with support and maintenance contract.

As a reminder, there are also $4.2 million of future license commitments from Vodafone that are yet to become due and payable at the end of the quarter. These amounts are in addition to the existing deferred revenue appearing on the balance sheet and are included in our backlog. Turing to the income statement, North American revenues represented approximately 44% of our total revenue with the remaining 56% being international.

License revenues for the second quarter of fiscal 2009, were $4.3 million or 24% of total revenue and include the approximate $800,000 of license revenue from Vodafone order which was placed from the Middle East. Service revenues were approximately $13.7 million or 76% of total revenue for the quarter. For the trailing 12-month period, ended March 31, 2009 support and maintenance revenues have averaged approximately $9.5 million per quarter. A portion of the slight decline from the $9.9 million average reported last quarter can be attributed to continued unfavorable foreign exchange rate changes.

Our support and maintenance renewal experience continues to be excellent as our customers utilize our applications for mission critical processes. We continue to see renewals in the greater than 90% range. As Steve mentioned, we received a seven figure multi-year renewal this quarter and year-to-date we had 12 renewals that each exceeded $300,000, demonstrating that Chordiant application continue to be critical to our customers businesses and the strong commitment that they have made to Chordiant.

With respect to margins, our overall second quarter non-GAAP gross margin including Licenses & Services were approximately 68%, down from approximately 72% in the prior quarter driven by a lower license revenue contribution. Service margins continue to be strong, for the second quarter non-GAAP service margin which includes support and maintenance are approximately 59% at the high end of our targeted range of 55% to 60%.

Turning to operating expenses, the costs in all functional areas declined sequentially due to strong cost controls and operational discipline. Our international expenses also benefited from foreign exchange rate changes.

Sales and marketing expenses, excluding stock-based compensation for the March quarter were approximately $6.1 million, down from $7.5 million in the prior quarter primarily due to lower sales commission, other head count related costs and lower program spending. We currently have 24 quota carrying sales reps, than alliance personnel as compared to 26 at the end of the prior quarter.

Research and development expenses, excluding stock-based compensation declined to $4.7 million for the quarter compared to $5.2 million last quarter. The primary reason for the decline was lower employee and consultant expenses in addition to lower fees paid to offshore vendors. General and administrative expenses, excluding stock-based compensation were $2.6 million for the second quarter, down from $3.9 million reported last quarter as the December quarter included the higher portion of our annual audit and professional service fees.

The non-GAAP operating loss for the quarter was 6.8% compared to a non-GAAP operating loss of 3.7% in Q2 of last year and down from the positive one half of 1% of non-GAAP operating income that we reported in the prior quarter. These declines were due to the lower revenues reported this quarter.

Other income, combined with interest income was approximately $34,000 for the quarter, down from the $977, 000 that we reported in the prior quarter. This decline was due to lower foreign exchange gains and lower interest income. Our income tax provision for the quarter was $1.1 million, approximately $700,000 of the provision relate to the non-cash charge related to the deferred tax assets established in the U.K. at the end of last year.

On a non-GAAP basis the net loss for the quarter was $1.6 million or $0.05 per share, compared to net income of $125,000 or breakeven EPS in the same quarter last year and $647,000 or $0.02 per share last quarter. Under GAAP the net loss for the second quarter was $3.5 million or $0.12 per diluted share.

Now let’s turn to cash flows in the balance sheet. At March 31, 2009 the aggregate cash, cash equivalent and restricted cash on our balance sheet was $53.4 million, down marginally from the prior quarter. On a constant currency basis, assuming that exchange rate have not changed from December 31, 2008, our cash balances at March 31 would have been approximately $54.7 million, an increase of $900,000 sequentially.

During the second quarter, cash flow from operation generated $3.4 million of cash due to strong cash collection. Year-to-date we have had positive cash flows from operation of $6.1 million. At the end of the quarter, our days sales outstanding or DSOs relating to accounts receivable were 52 day, down significantly from the 80 days at the end of the last quarter. The majority of our cash and equivalents are invested in institutional money market fund and short term deposits with large financial institutions. To date we have not experienced any losses on these investments.

Turning to our outlook for the remainder of fiscal year 2009, visibility has not yet improved to a level were we can accurately predict the size and timing of new transaction. So consistent with our disclosures last quarter, we are not providing fiscal year 2009 guidance at this time. We continue to expect that once market condition stabilize and predictability is more assured we will once again provide forward looking guidance.

However, let me provide some general parameters relating to our view of the remainder of fiscal year 2009. The remaining minimum Vodafone license payments are contractually committed for our Q3 ending on June 30, 2009. As discussed earlier, these commitments should result in approximately $4.2 million of license revenue in the third quarter. These revenues when combined with orders booked today, another expected booking should return us to non-GAAP profitability for the third quarter.

We also expect to recognize $1 million to $2 million of the remaining $6 million in license revenue backlog exclusive of Vodafone over the next two quarters of fiscal year 2009. We also expect to continue to renew our existing support and maintenance contracts at rates in line with our historic experience. For the trailing 12-month period, ended March 31, 2009, support and maintenance revenues averaged approximately $9.5 million per quarter. We expect our average quarterly professional services revenues for the remainder of fiscal year 2009 to decline slightly from the levels achieved in our second quarter.

We continue to diligently analyze and manage our expenses to be appropriate for our current run rate. Given the continued uncertainty associated with the timing of new bookings, we will update our expectations with respect to profitability for the fourth quarter and the full fiscal year on our next earnings call.

With respect to our cash balances, we anticipate the collection of the committed Vodafone receivables in our third quarter ended June 30. Cash flow in our fourth quarter will be highly dependent upon the level of bookings achieved for the remainder of the year. These projections assume that the U.S dollar does not materially strengthen or weaken from its current level.

Now, I would like to turn the call back over to Steve for a few closing remarks. Steve.

Steve Springsteel

Thanks Pete. While the market conditions remain challenging, I’m pleased that we are still able to close large transactions for new orders of our products while also maintaining high renewal rates of maintenance and support agreements, and our pipeline remained strong.

We continue to manage our expenses and headcount, and we expect to return to profitability in our current third fiscal quarter. We are going on the offence of even more aggressively than in the past. We continue to focus on our faster ROI products and competing aggressively on multiple fronts.

We have continued adjusting our cost structure with the focus on profitability to ensure that our strong capital structure is preserved. We have proven our ability to more of the company to address the current market demand and I believe we have the right products, people, partners and strategy to ensure that Chordiant remain a leading best-in-class provider of customer experience solution.

With that, we’d now like to open the call for questions. Operator.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Derrick Wood with Wedbush Morgan Securities. Please go ahead.

Derrick Wood - Wedbush Morgan Securities

Good afternoon guys.

Steven Springsteel

Hi Derrick.

Derrick Wood - Wedbush Morgan Securities

I’m looking at the 10-Q, and it looks like you recognized roughly $2 million from Citi. Just curious if you can up date what the pipeline looks like with Citibank. First of all, is that mostly services revenue at this point and then what do you expect going forward?

Steven Springsteel

Yes, Derrick this is Steve. We don’t get into lot of details about the pipeline, specifically even as it relate to customers.

I can tell you that Citi seems to still be hanging in their going okay. It wasn’t to the level that we thought that it was going to be when we signed the contract a few years ago, but I think we’re pretty much wrapped up on the professional services side there. So now we are expecting continued roll out from more seat orders since we progressed forward.

Derrick Wood - Wedbush Morgan Securities

Okay. On the cancellation of the SOW, that was just one customer?

Steven Springsteel

The majority was one customer.

Derrick Wood - Wedbush Morgan Securities

Okay and did that have to do anything with Citi or…?

Peter Norman

No, it didn’t have anything to do with Citi this quarter.

Derrick Wood - Wedbush Morgan Securities

Okay and so Pete you said professional service is going to tick down from last quarter, but it sounded like you didn’t expect a big step down, is that right?

Peter Norman

Yes, we said a slight decline from the current quarter.

Derrick Wood - Wedbush Morgan Securities

Okay. I guess in terms of the products, it looks like decision management license revenue was down quite a bit, but I know that’s an area that seams to be of increased demand and you guys have called that out, is that just typical seasonality and if you could just give us color as to what happened around that pipeline and whether deals had slipped and any kind of sense of pipeline color that would be great with that product.

Peter Norman

I don’t think decision management pipeline went down or revenue went down; actually decisioning is doing very well right now and the transaction just provides some more color into the transaction that we closed. Already this quarter was a carryover from last quarter. It was a decision management product; it was in financial services and it was in North America. So those are some interesting data points.

The other interesting data point is, what we’re finding as we work more and more of these decisioning and analytics transaction is that they are very capable of going into multi-million dollar transaction. That is evidenced by the most recent one that we closed this current quarter.

Derrick Wood - Wedbush Morgan Securities

Any sense for what the average sales cycle is for that product?

Peter Norman

It’s hard to say Derrick, but in light of the last couple of quarters from a macroeconomic prospective, it’s hard to say.

Derrick Wood - Wedbush Morgan Securities

And then any color on the foundation side of things, are you guys putting much focus on that, are there any conversations that are near term demand or are you really focused on the decisioning side?

Peter Norman

Yes, I’ll you; at the end of the day foundation is still very core to what we do and foundation is more of a transformational type of project. We still have some of those in the pipeline and hopefully we’ll get one of those to pass the globe line this quarter. Again those aren’t going away by any such imagination. It’s just decisioning typically has a quicker time to value than the transformational foundation like product.

Derrick Wood - Wedbush Morgan Securities

The last question Pete, the accounts receivable came down quite a bit sequentially; can you give us some read on that?

Peter Norman

Yes we just worked it very aggressively, we brought our DSOs down from I think it was 80 days at the end of last quarter to 52 days this quarter, so we just worked it real hard

Operator

Your next question comes from the line of Kevin Liu with B. Riley & Company; please go ahead.

Kevin Liu - B. Riley & Company

Hey you guys. You mentioned earlier that you thought that there might be some opportunity, particularly with integrating some of the acquisitions that you’ve financed, that those customers have done. I was wondering how many of those conversations are kind of going on in the pipeline now and would you expect any of these types of deals to close, maybe within the next year or so?

Peter Norman

Yes, I’ll tell you, we’re very active in a pretty large one right now. If you look Kevin at kind of the history of the company, what foundation technology does enable is, it goes out to disparate data basis, pulls all that information together at whatever that touch point is. So M&A transactions are perfect for us, because you have two companies that have obviously disparate database’s of information. You bring all that together at whatever touch point the customer comes in at, either on the web or in the call center as an example, as a perfect environment for us. So yes, we have a number of opportunities and I really expect to close one in the next year.

Kevin Liu - B. Riley & Company

And then in terms of the large transaction, did I hear correctly that those revenues would get recognized within the third quarter?

Peter Norman

Yes, those are Q3 items, yes.

Kevin Liu - B. Riley & Company

Okay. So we shouldn’t see too much of that flowing in the difference line?

Peter Norman

No, we said it was the decisioning.

Steve Springsteel

Yes, that was a decisioning, so we would recognize that revenue in the current quarter.

Kevin Liu - B. Riley & Company

All right, and then the OpEx side of it came down quite a bit just sequentially, so I was wondering if there’s still some areas where you can pick a way at that here in the near term or if this is a decent run rate we should go with?

Peter Norman

Yes, we continue to look at every contract and every obligation as it comes up for renewal and we’ll continue to work diligently to bring OpEx down. We also benefited from the FX changes on the expense side.

Steve Springsteel

I mean we’re always looking at where we could find operational efficiencies, and we’ve been pretty good at that.

Kevin Liu - B. Riley & Company

And then just lastly on the maintenance front, the large scale that you guys renewed there, perhaps what you’re seeing on other contract negotiations, I’m wondering if you guys are doing any sort of discounting that might be out of the normal range for you?

Peter Norman

This is Pete. No Kevin, we’re not actually. Maintenance renewals seem to be holding in pretty well, and I mean we’re in mission critical applications and they are big transactions and they kind of have to renew it.

Kevin Liu - B. Riley & Company

Okay, that’s all from me.

Operator

(Operator Instructions) Your next question comes from Patrick Walravens with JMP Securities; please go ahead.

Meg Whitman – JMP Securities

Hi guys. This is actually Meg Whitman for Pat, how are you?

Steve Springsteel

Good.

Meg Whitman – JMP Securities

Just my first question; I know you talked about the new addition to your management team, the new Head of Marketing. Can you talk for a minute about your search for a new Head of Sales and update us on that front?

Steve Springsteel

Yes, we made a decision three months ago, I guess it’s been probably about two, three months ago that we’re going to make a change and we made the change such that the regional sales heads report directly to myself, the CEO; and that seems to be working out well and I’m getting closer to the fields, spending more time with customers and giving them first hand real look of what’s going on out in our customer base and out in the field and that’s working out well.

We very well may end up putting some one in that Worldwide VP of Sales position, if the right person comes along and we’re always talking to folks that could fit that role, but we don’t have an active search underway and we’re up currently working it on a real time basis.

Meg Whitman – JMP Securities


And then a quick question on maintenance revenue; I know you talked about the 90% renewal rates on a revenue basis and for a client account basis, but for the clients that are renewing or can you talk about whether there is a decreases; is it due to renegotiations of client contracts or actual clients leaving, could you just break that out?

Steve Springsteel


I would just say that the non-renewals for the most part are much older contracts for the smaller dollar amount.

Meg Whitman – JMP Securities

And then just one quick last question; just any thoughts on thinking about selling this business and maybe any strategic conversations you had with interested parties? That’s my last question. Thanks.

Steve Springsteel

We’ve always said and I said it from day one when I took the job over three years ago, that we felt that this company would eventually be part of a larger entity and we still believe that that’s the case. If there is an offer that were to come to the company that was a fair offer, our Board would evaluate it and it was in the best interest of the shareholders, we would move on such an offer.

Having said that, we obviously haven’t had an offer which fits those criteria to-date and so we’re continuing to move forward with business; and as we’ve said, I feel pretty upbeat about the way the macroeconomic seems to be working and the sales activity seems to be picking up pretty dramatically in the last six weeks. So I’m encouraged by that, but just as we’re not trying to buy or sell the company by any stretch of the imagination, but at the same time we’ve always been open for a legitimate price that’s in the best interest of the shareholder.

Meg Whitman – JMP Securities

Great, thanks guys.

Steve Springsteel

Alright thank you.

Operator

(Operator Instruction) Thank you. I’m showing no further questions. I’ll turn it back to management for any closing remark.

Steve Springsteel

Okay. I’d like to thank everybody for taking time out of the busy schedule to be with us this afternoon and myself and the rest of the management team looks forward to you on our next earnings call when we announce our fiscal Q3 earnings. Once again, thank you very much.

Operator

Ladies and gentlemen, this concludes the Chordiant Software second quarter 2009 earnings conference call. If you like to listen to a replay of today’s conference, please dial 1-800-405-2236 or 303-590-3000 of access code 11130341. ACT would like to thank you for your participation, you may now disconnect.

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