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Executives

Vivek Y. Ranadivé - Founder, Chairman, Chief Executive Officer and President

Murray D. Rode - Chief Operating Officer, Interim Chief Financial Officer and Executive Vice President

Analysts

Brent Thill - UBS Investment Bank, Research Division

John S. DiFucci - JP Morgan Chase & Co, Research Division

Jason Maynard - Wells Fargo Securities, LLC, Research Division

Brad A. Zelnick - Macquarie Research

Gregory Dunham - Goldman Sachs Group Inc., Research Division

Raimo Lenschow - Barclays Capital, Research Division

Aaron Schwartz - Jefferies & Company, Inc., Research Division

Karl Keirstead - BMO Capital Markets U.S.

Steven R. Koenig - Wedbush Securities Inc., Research Division

Matthew Hedberg - RBC Capital Markets, LLC, Research Division

James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division

Mark R. Murphy - Piper Jaffray Companies, Research Division

TIBCO Software (TIBX) Q2 2013 Earnings Call June 20, 2013 4:30 PM ET

Operator

Good afternoon, ladies and gentlemen. My name is Dustin. Welcome to TIBCO's Second Quarter 2013 Conference Call. [Operator Instructions] You can also listen to this call via the Internet at www.tibco.com. Today's call is being recorded and will be available for playback from TIBCO Software's website at www.tibco.com. In addition, replay will be available through InterCall for 1 month following today's call by dialing (800) 585-8367 or (404) 537-3406. The passcode for both the call and the replay is 91499868.

The following conference call includes forward-looking statements, which represent TIBCO Software's outlook and guidance only as of today and which are subject to risks and uncertainties. These forward-looking statements include, but are not limited to, forecast of revenues, operating margins, operating expenses, outstanding shares and earnings per share for future periods. Our actual results could differ materially from those projected in such forward-looking statements. Additional information regarding the factors that could cause actual results to differ materially are discussed in the Risk Factors section of TIBCO's most recent reports on Form 10-K and 10-Q filed with the Securities and Exchange Commission. TIBCO assumes no obligation to update the forward-looking statements included in this call, whether as a result of new developments or otherwise.

This conference call also includes certain financial information that has not been prepared in accordance with Generally Accepted Accounting Principles as we believe that such information is useful for understanding our financial condition and results of operations. For a presentation of the most directly comparable financial measures calculated in accordance with GAAP and a reconciliation of the differences between the non-GAAP and GAAP financial information, please see our website at www.tibco.com.

The participants on the call are Vivek Ranadivé, TIBCO's Chairman and CEO; and Murray Rode, Chief Operating Officer and interim Chief Financial Officer. I would now like to turn the call over to Vivek.

Vivek Y. Ranadivé

Thanks, Dustin, and thank you all for joining us. I will begin with a few remarks on our second quarter performance and offer some commentary on the broader environment. Murray will then discuss Q2 operating details and provide further guidance before we turn it over for Q&A.

In summary, this quarter we delivered very good results within our guidance range across all metrics. Total revenue came in at $246 million, license revenue was $82 million, non-GAAP operating margins were 18.4% and our non-GAAP EPS was $0.18. Our recent investments and organizational changes are starting to pay off. Demand for our offerings is strong, and we see encouraging signs and a healthy base of activity as we look into the second half of the year.

Now on the broader environment. It's certainly the case that European market conditions and government spending, for example, could be stronger. But I have to say, in the market at large, I don't believe that for us, there is a spending or demand issue. In my many conversations with customers, I have not seen those customers unwilling to spend money. However, what is the case today is that software providers of every stripe need to demonstrate value to sell their products. They need to showcase their differentiation and more importantly, make precisely clear how they will move the needle for their clients in terms of revenue or market share gains, specific and lasting cost reductions or improvements in managing risks.

Our company has a history of achieving our goals and has evolved extensively over the last decade. Just last year, for example, we reached the $1 billion mark in revenue. And as you are aware, we have been making some adjustments as part of our latest evolution. In particular, we've undertaken changes in our core infrastructure business with some sales leadership changes in the Americas.

As this quarter's results now begin to show, these changes are working. We have a program, a process and a strong leadership team in place. Focusing on the basics and applying the right mix of intelligence, passion and hard work, it turns out yields positive returns. In short, we believe we're doing the right things, and our actions are bearing fruit. But some work remains and certain elements will likely always remain as we continue to grow and develop our business.

As we look forward, we're making 3 big bets. First, we're going to double down on integration, a market we pioneered and own, whether it's Cloud Bus, our new Integration Platform as a Service offering; or our -- the latest release of FTL, Faster than Light, within memory persistence for guaranteed delivery; or the addition of StreamBase to our event processing portfolio. Nobody has a greater ability to bring together data for people, systems and machines at speed and scale.

Second, we are going to continue to build our franchise in analytics and expand our ability to extract actionable insights from Big Data. We saw another good quarter for Spotfire in Q2, and we'll continue to invest in new sales and services people, organic R&D and additions such us Maporama, a geospatial visualization company we recently acquired.

And third, we're going to bet on the cloud, both in building out our Platform as a Service, but also with specific software-as-a-service applications such as Loyalty Lab and tibbr. We're going to give our customers the choice of using our IP on-premise or as a cloud service.

We always strive to be the innovation leader in our core technology segments. But together as a whole, our capabilities form a powerful event-driven platform that is unique in its ability to handle Big Data. With it, customers can marry data addressed with data in motion, transactions with events and structured with unstructured information. They can not only understand what happened in the past, but also be better able to anticipate the future for when opportunity comes calling next. Ours is a platform that operationalizes Big Data and delivers on our promise of the 2-second advantage.

One example of this platform at work is around the solution approach we call turning customers into fans. This is a platform sale that addresses the times we live in. It delivers the needle-moving value that not only CIOs but CMOs and line of business heads everywhere need today. With it, our clients can know their customers, understand their taste and preferences, encourage and reward desired behavior and engage in a more lasting, value-enhancing relationship. This is something I can assure you that our customers will spend money on today, and it is something we do uniquely with our abilities, including to stitch together systems, people, machines at speed and at scale to automate end-to-end dynamic processes; to extract insights from Big Data; to configure rules and listen for patterns amidst streams of events; and to have a single pane of glass into the processes and data of an enterprise.

In addition to that, you also need loyalty science experts to build and cultivate true customer engagement and data science expertise to determine which trends are most relevant. We have the goods. We can turn customers into fans. Yes, this is relevant in retail and underlies our strength in that vertical in recent years. But it now turns out that almost every business is a retailer, whether you're an airline, an insurance company or a utility. Every business today needs to engage their customers, build a personalized relationship and work to own a greater share of customer loyalty and spend.

In summary, I believe we are very well positioned for the road ahead. Now I'll turn it over to Murray to elaborate on some of the finer details. Murray?

Murray D. Rode

Thank you, Vivek. I will focus my comments on recapping key financial and operating metrics from Q2 and then provide our guidance for next quarter. I'll review our financials on both GAAP and non-GAAP basis, a full reconciliation of which is included within our press release, along with an explanation of our non-GAAP measures.

In the second quarter of fiscal 2013, we recorded total revenue of $245.8 million, license revenue of $82.3 million and services revenue of $163.6 million. While year-on-year currency effects were negligible, I might point out that adverse moves since we provided Q2 guidance led to approximately a negative $1.4 million impact on total revenue and a negative 600k impact on license revenue. Non-GAAP gross margin for Q2 was 72.4%. Non-GAAP operating income was $45.3 million, resulting in an operating margin of 18.4%. Non-GAAP EPS in the quarter was $0.18, and Q2 cash flow from operations totaled $24.9 million.

Moving to the balance sheet. We finished Q2 with cash and short-term investments of $726.6 million. Deferred revenue, including both long- and short-term components totaled $274.1 million, up 8% from a year ago. DSOs in Q2 were 69 days versus 64 days a year ago and 64 days in Q1. Finally, in the quarter, we repurchased 3 million shares at an average price of $19.48 for a total of $59 million. In addition, the loan on our corporate campus came due, so we spent $35 million to pay that off.

Overall, we thought we had a solid quarter. I would highlight the following 5 points. First, we saw strength in a number of our key verticals, namely, financial services, retail, energy and logistics. Four of our top 10 deals were in financial services and 3 were in retail. Among the verticals, financial services was up 10% year-over-year and 17% sequentially, energy was up 8% year-over-year and 25% sequentially, retail was up 19% year-over-year and 12% sequentially and transportation and logistics was up 57% over last year and 42% sequentially. And much of this increase, particularly the sequential increase in these verticals, was driven by improved operating performance from the Americas infrastructure business, which we believe came about as a result of our adjustments over the last 2 quarters in process, methodology, enablement and leadership.

Second, while the broader SOA category was down, our primary integration product, BusinessWorks, and our core messaging products were all up between 19% and 39% over last year. Third, Spotfire delivered another strong quarter with year-over-year growth of 30%. Fourth, when adjusting Q1 license revenue for a larger-than-usual contribution from deferred license, our sequential license growth this quarter was quite a bit stronger than normal. And fifth, we saw a healthy increase in overall activity as demonstrated by one of our core metrics, license transactions, over $100,000.

Let me now turn to our usual operating metrics for the quarter. Looking at the geographic mix, total revenue was as follows: Americas at 58%; Europe, Middle East and Africa, 32%; and Asia-Pacific, Japan at 10%. Vertical markets were as follows: Financial Services was 25% of total revenue; Communications, 11%; Energy, 9%; Retail, 8%; Manufacturing, 7%; Transportation and Logistics, 7%; Government, 6%; and the Life Sciences, 5%.

The breakdown of the license revenue among our major product families was: SOA and core infrastructure at 52%; business optimization, 40%; and process, automation and collaboration, 9%. And in Q2, as I mentioned, we had 147 deals, over $100,000 in license revenue, up from 137 a year ago and 104 in Q1. We had 12 deals over $1 million versus 20 a year ago and 12 in Q1. Average deal size for deals of $100,000 in license or greater was $488,000 versus $619,000 a year ago and $652,000 in Q1. Median deal size, however, was very consistent with the past 6 quarters or so. Our top 10 customers comprised 15% of revenue compared to 19% last year and in terms of sales capacity, we ended Q2 at 299 quota-carrying heads.

As we look forward to Q3, we see a strong pipeline with a lot of activity across geographies and business units, and we believe operational improvements combined with this increase in activity leaves us well setup for Q3 and the second half of the year. That said, we continue to monitor the performance of our business, and we will take appropriate action to reduce costs and rebalance resources where we're not seeing the right return.

For Q3, we expect total revenue to range from $253 million to $263 million, license revenue to range from $85 million to $95 million, non-GAAP operating margin to range from 21% to 22%, non-GAAP earnings per share for the quarter to range between $0.21 and $0.23 with an assumed tax rate of 27.5%, which I would note is a bit higher than we were modeling as of our last call. GAAP EPS should range from $0.03 to $0.05 with an assumed tax rate of 30%. Our actual GAAP and non-GAAP tax rates can vary depending on the mix of foreign versus domestic profits.

So with that, we will be happy to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Brent Thill with UBS.

Brent Thill - UBS Investment Bank, Research Division

Vivek, just on the sales force, maybe just give us a sense of where you think you are in that transformation. And what additional steps do you think need to transpire to return you to full health?

Vivek Y. Ranadivé

Yes, I think we have -- we think we are where we need to be at this point. We've changed everything from A to Z starting with the leadership, and we polished every part of the process from who do you call on and what's the message, all the way down to what do you do and how do you work in the field. And I think the results this quarter in North America show that all of those efforts are starting to bear fruit. So at this point, we just have to deliver and show what the outcome is. So we think we've done all of the things that we needed to do.

Brent Thill - UBS Investment Bank, Research Division

And just real quick in the SOA business, there's been a lot of questions from your investors about the trajectory in that business. Murray, you gave some metrics. But I guess just from your perspective, is this just a potential lumpy transaction that kind of happens not as linear as you'd like? Or what are you seeing that's causing this type of somewhat erratic results in the SOA business versus the analytics business?

Murray D. Rode

Well, I think a big factor in the numbers around the SOA and core infrastructure category is just the range of products in that category. It's a big category that spans a lot of different things, and I think that was part of the reason why I was careful to point out that the core elements of that, things like BusinessWorks and our core messaging products did well in the quarter. Unfortunately, a lot of the other products in that category kind of overshadowed that fact a little bit. But I think the better performance out of BusinessWorks and core messaging also goes to the fact that the North American infrastructure sales force, and kind of going back to basics on execution, did well selling those products.

Operator

Our next question comes from the line of John DiFucci with JPMorgan.

John S. DiFucci - JP Morgan Chase & Co, Research Division

My question has to do with execution, what you just mentioned, Murray, but Vivek's also talking about process. And in your press release, you say execution remains top priority, which sort of implies you have the right strategy in place. But we've seen several quarters now where you sort of struggled. This one, you put up some decent results. But I'm just curious, it does seem like you've sort of done a lot of self-reflection and -- but it makes you wonder if the right strategy is in place relative to execution, and you mentioned you've improved the process, but I guess, is there any way you can help us understand, and I know that might be difficult to do, but help us understand what you have actually changed as far as process goes and strategy?

Vivek Y. Ranadivé

Yes, so we -- just what the process we've actually polished and then fine-tuned it from A to Z, from who are we calling on, where are we spending our time and what are we -- how are we dealing with our existing customers and what are we saying to them and what is the messaging. And when we're in a sales cycle, we are winning the technical evaluation 10 times out of 10. But last quarter, we lost a couple of times to big guys because they were taking the approach good enough, that they're good enough. And so how are we adjusting and what are we doing with our processes and this quarter, we didn't lose a single deal to those guys. So we've gone through and looked at everything. There's absolutely not a sliver of doubt that we have the right strategy because we have many proof points of where customers have had huge success from the things that they're doing with us. And now we're starting to see that by having different leadership, having different players in different parts under that leadership and really focusing on execution and process that we're starting to really do well. I don't know, Murray, do you want to add to that?

Murray D. Rode

I would just add that, something we mentioned in past couple of calls, too, that we were working on is returning to consistent application of the process and the methodology that we have. I think one of the things we've highlighted in past quarters is that there was not, from the leadership, consistent applications so that the elements, the infrastructure sales force were all rolling in the right direction, doing things the same way. If you ensure that you follow your process, then you have a more reliable basis on which to evaluate your metrics. If people are doing things differently, then it's much harder to look at the kind of data you're getting back from your pipeline and your sales force. So I think a lot of what we're talking about, and Vivek is talking about when he says sort of looking at things from A to Z, is really ensuring that we do what we're supposed to do, that we follow our processes, that we follow our methodologies, that we do inspect the pipeline and the sales cycles of the significant deals.

Vivek Y. Ranadivé

Yes, and when we do that, we have great success and there's no -- there's absolutely not a sliver of doubt that, that 2-second advantage, the event-driven platform, turning customers into fans, the various initiatives we have are -- there's huge demand for them.

John S. DiFucci - JP Morgan Chase & Co, Research Division

Okay. That is helpful. And if I might, just one follow-up for Murray. You said sequential license is better than normal seasonality if you adjust for the license that's come off the balance sheet. Can you tell us anything about either how much license is in deferred right now or how much came off this quarter? Or any kind of metric you can give us along those lines?

Murray D. Rode

So we haven't been specifically calling it out, but this quarter, there was really no license to speak of that came out of deferred into the quarter.

Operator

Our next question comes from the line of Jason Maynard with Wells Fargo.

Jason Maynard - Wells Fargo Securities, LLC, Research Division

[Audio Gap]

On management and filling some of the holes. Just first up, I apologize if I missed this, but kind of what are you thinking about in terms of this next CFO hire and where are you at that process? I assume Murray doesn't want to be doing this forever. And then the second question really is to you, Vivek. With your purchase of the Sacramento Kings, how much time are you going to be devoting to that? Is that something that you anticipate taking more time away from TIBCO? Are you going to be spending more times negotiating with DeMarcus Cousins and managing him or fighting Oracle and IBM out in the field?

Vivek Y. Ranadivé

Okay. So I'll answer the second question first. I'm basically a software salesman, so that's my job. And the way that these teams work is you have a president to run the business side and then you have a GM to run the basketball side, and we've got all of that in place. So my primary job in life is to sell software. In terms of the CFO search, we have narrowed it down to a few candidates, and we feel that we're fairly close to making a final decision on this. Murray has been leading the process in partnership with the Board. So Murray, I don't know if you want to add anything?

Murray D. Rode

No, I think that's it. We are well into the process, and we're being deliberate about it. We're not panicked. We want to find the right replacement that will fit with the culture. And I think you asked in there, too, I think kind of what we were looking for in terms of the next CFO, and I think a few things are pretty important to us. Someone that does understand the business, that can support the strategy, that is strong in terms of being able to lead the development of the model, particularly as we do new things like embrace these SaaS offerings and whatnot. So I think in sum, it's looking for someone who can be more of a -- really more of a kind of a strategic leader and CFO.

Vivek Y. Ranadivé

Yes, so we're looking for more than just a financial expert tactician. We're looking for somebody who is able to understand the business and be a partner to the business units.

Operator

Our next question comes from the line of Brad Zelnick with Macquarie.

Brad A. Zelnick - Macquarie Research

Vivek, I appreciate that you met your guidance, but you're selling into growing end markets and your license revenues are down double digits and you've guided for a similar decline in Q3. So we've been talking about execution issues for [ph] quarters now. I know we've already had a couple of questions on the topic. But specifically, what metrics should investors hold you accountable to as it relates to these issues? And specifically, what performance indicators are you managing the sales force by that maybe you can share with us and help us better understand?

Vivek Y. Ranadivé

Yes, so we have -- we're positioning the company for the next phase of growth, which is to be a $2 billion company. We believe that there's a gold rush coming for eventing platforms, for turning customers into fans, for Big Data analytics and visualization for cloud for mobile. All of the things that we're best in class in, we believe there's a gold rush just ahead of us. And so we are very, very strongly committing to be the best of the best in all of those categories. So we're -- and we're holding a high bar in terms of our sales force and our execution capability. We're also starting to do a much more cloud business. We're starting to invest in areas like Loyalty, which is software as a cloud service and tibbr, and we have metrics that hold our people accountable at a fairly, I would say, a higher-than-industry average level on all of those. Now -- we have been through this before, Brad, where we were a $10 million, $20 million company and then we went to $100 million and we had to rebuild the platform. We were a messaging company, and then we became more of a message brokering company and then we became more of an integration platform. And now we've become a full event-driven platform that is now starting to offer solutions like turning customers into fans. So when you go through those transformations, then you rebuild and that's what we've spent the last few months doing. But it's really positioning for what we believe is going to be a very, very big gold rush. Every single customer of ours, every single client of ours wants to have a better understanding of their customers and how to reach out to them, and then tie that to the rest of their value chain in terms what are the products they have. At the end of the day, if customers can simply connect what they have with what their customers want, that's nirvana to them and there's no company that can do that like we can. So we sit here in a, we believe, in a very, very strong position. Murray, I don't know if you want to add to that.

Murray D. Rode

Only that in terms of metrics, we're certainly holding our sales force accountable for their quarterly metrics and the commitments that they make as they go into the quarter. I think, too, in terms of our guidance, I think we're being appropriately cautious about sequential increases and the upward trend that we see in the business.

Brad A. Zelnick - Macquarie Research

I appreciate it. And Vivek, you're a pioneer and a visionary by -- in every respect by definition. And with that, if I could just ask one more, on StreamBase. Fantastic asset that I've had an eye, too, over the years. Can you maybe just share a little bit about what you see? Because I think there's some overlap with what you already offer in BusinessEvents and -- but I think they also give you some real-time analytics capabilities. And just a small question related to that, does your guidance that you've given us assume contribution from StreamBase?

Vivek Y. Ranadivé

Yes, so we -- I'll just say one thing, and then I'll let Murray address it in more detail. But we've never been unwilling to accept areas where somebody else is ahead of us or better than us, and we always want to be the best of the best when it comes to things like messaging, event -- complex event processing, being realtime. And so as you mentioned, there were certain areas where they had absolutely the best, and that's why -- just like when we bought Talarian years ago with messaging. So Murray, I'll let you kind of take it from here.

Murray D. Rode

Well, I think that, that comparison to what we did in messaging in past years is a good one. We -- historically, we doubled down on messaging and kind of rolled up that space and the core competence in that space. So there is a similar principle at work here where StreamBase, if you consider it in the context of what we did last year with LogLogic, now StreamBase, along with our own product, BusinessEvents, gives us a very nice continuum of capabilities around event processing, everything from machine data through discrete event processing with rules, which is what we do very well with BusinessEvents and now this high-volume, high-throughput event processing that StreamBase offers. So again, gives us a complete spectrum of capabilities in the space.

Vivek Y. Ranadivé

Yes, and also, we really are the Big Data company when you think about that because we can look at all kinds of Big Data, whether it's at rest or in motion, and we can make sense out of it and we can do it using Spotfire, but then we can also instrument it and look at it and apply rules to it. So we're just getting stronger and stronger in terms of our position in that space.

Operator

Our next question comes from the line of Greg Dunham with Goldman Sachs.

Gregory Dunham - Goldman Sachs Group Inc., Research Division

[indiscernible] a couple of times. I guess, what's the scope of what...

Vivek Y. Ranadivé

We didn't hear [ph] you. Missed your first part. We couldn't hear you for the first 10 seconds, so can you repeat yourself?

Gregory Dunham - Goldman Sachs Group Inc., Research Division

Sure. It's basically just thanks for taking my questions, didn't really get into it yet. But really, I wanted to hit on SaaS because you've mentioned it a couple of times. And really, I want to know what makes sense for you guys to do and what doesn't make sense in SaaS in terms of how you're thinking of building that organically and inorganic. And then a second question, unrelated, you highlighted the Spotfire business. That continues to do well, up 30%. But business -- other areas of business optimization are not going as fast. I guess, what are some of the challenges you're seeing in the other areas of business optimization, and how quickly can you get those resolved?

Vivek Y. Ranadivé

Yes, so I'll just talk a little bit about the business optimization and let Murray talk about it and then answer the first part of the question. But we're very, very bullish on where we go with the rest of the business optimization stack. Also, with StreamBase, we have covered all elements of that stack now, and we just need to continue to put focus into it. It's gone from being kind of a nice-to-have to being a must-have and sometimes, we're just bundling it in with some of the other products. And so I wouldn't pay too much attention to the actual dollars even though they are important. But I don't know, Murray, do you want to add anything on that?

Murray D. Rode

I think that bundling characteristic is an important point. We've mentioned that on past calls that increasingly, BusinessEvents or some kind of eventing capability is becoming a differentiator for the other products and certainly for the platform as a whole. So I think exactly as Vivek said, the numbers aren't unimportant, but I think the most important thing to us is how BusinessEvents is helping the overall platform proposition. So that may mean that the discrete number allocated to BusinessEvents doesn't -- kind of doesn't quite show the strategic contribution that it makes to us selling the rest of the platform.

Vivek Y. Ranadivé

Yes, and then in terms of the SaaS marketplace and where we are in that, so we have a number of unique opportunities in that marketplace. The first one I'll mention, because we just announced it, is Cloud Bus. And so even with SaaS -- you have SaaS for many different people, and so you need to be able to integrate all of that and you need to be able to integrate it either in the cloud or on premise. You need to have cloud to cloud, cloud to premise, premise to cloud, premise to premise and all of the permutations. Nobody can do that like we can, and Cloud Bus is an example of that. So that's a huge opportunity for us. The more -- we're beneficiaries of entropy. Whenever there's something new, it needs to be integrated and we're the ones to do it. The second is we can string our pearls together to create these pearl necklaces that are solutions, and some of them are cloud-based. And so we're not going to pave a cow path and just offer a 20th century CRM and then offer it in the cloud and say, "Okay. That's something new." What we're doing is something that nobody else can do. And so things like what we do with real-time loyalty and offers and tying that to mobility and everything else. That is offered as a cloud service. So there's a class, what I call the 21st century class of problems that require 21st century solutions that nobody else can do, and we're making those available through cloud software-as-a-service type offerings. And number three is we're just making all of our product stack -- we're allowing people to consume it in whatever fashion they desire to. And if, in certain instances, it makes sense for them to consume it through a SaaS model, then sure, we'll do that for them. So from our perspective, this is a huge area of opportunity, and we're already doing some things, so things like Spotfire where we're offering it on a cloud-type basis and you'll see. For us, the beauty of it is it's all incremental revenue, so it's all additive. And in some instances, it opens the door, we get in and they still want to go back and buy some on-prem software. So it's all opportunity for us.

Operator

Our next question comes from the line of Raimo Lenschow with Barclays.

Raimo Lenschow - Barclays Capital, Research Division

The question I had is, if I look at the large deals, i.e. the deals over $1 million, that's not doing that great at the moment and it's another quarter. But then you see -- we're seeing good momentum on the volume side of the business with kind of deals over $100,000 doing really well. Can you just talk a little bit about how you see customer behavior at the moment as times are tough? Oracle quarter was bad as well. And how does that change if you look into your pipeline?

Vivek Y. Ranadivé

Yes, so we -- for the longest time, we were criticized because we had too many big deals. And so we as a company have worked hard to not be dependent and to be able to make our numbers without any big deals. So we're actually proud of the fact that we had a decent quarter without actually being dependent on big deals. Now that being said, I can tell you from my own involvement as well that there is a pipeline of big deals out there. People are willing to spend big chunks of money if you can show them that you can move the needle. So we feel really, really good about where we are, both in terms of our ability to crank up the smaller deals as we did this quarter, as well as our ability to move the needle for customers and get them to spend big chunks of money.

Operator

Our next question comes from the line of Aaron Schwartz with Jefferies.

Aaron Schwartz - Jefferies & Company, Inc., Research Division

You spent some time talking about the process change within your sales organization. I know it's not the first time you've talked about that, but the sales leadership change has also been going on. And I guess my question is, did one lead the other? Is the process change sort of more involved than you would've thought when you made some of the leadership changes? And as a combination of those 2, is that sort of a reason why maybe it's a little longer for the sales execution to take hold? Or is it more macro related?

Vivek Y. Ranadivé

Well, it's -- I can't really blame the environment. We just were -- we had -- we didn't have the right leadership, and then that filtered down a level and we just needed to go and rebuild all of that. And so we have nobody but ourselves to blame. So it's really our fault, and we feel like we've done a lot of that hard work now over the last 6 months. The results are starting to show, and we're optimistic about the future.

Aaron Schwartz - Jefferies & Company, Inc., Research Division

Okay. And a quick follow-up, if I could, on the quota-carrying headcount. Was that by design sort of taking down here? Was that some forced attrition? Or was that -- maybe you can just kind of walk through the reasoning there.

Murray D. Rode

Yes, I mean, it was pretty, pretty small change from last quarter. I think as we said on our call from last quarter, we're pretty comfortable right now around this 300 range, and I think there's going to be a little bit of variation plus or minus around that number. And then I would expect likely as we exit the year to see an increase in that again as we go into 2014.

Operator

Our next question comes from the line of Karl Keirstead with BMO Capital Markets.

Karl Keirstead - BMO Capital Markets U.S.

I just wanted to ask a question about the core SOA business. It's pretty clear that a portion of that revenue mix is fairly mature, declining. It must be at more than double digits to offset the good growth that you're seeing in the BusinessWorks and core messaging business. So to me, that seems like a product mix issue, not a sales execution issue. And so my specific question, Vivek and Murray, is as part of TIBCO's turnaround, are you giving any thought to divesting some of the more mature SOA assets that might be pulling down your overall license growth?

Vivek Y. Ranadivé

Yes, we don't see it that way, Karl. We see it as execution because we have instances where people are willing to spend money for all of those elements. And we have -- and this is something that I personally do on an ongoing basis. So we look at our entire product stack, and we constantly look at where it is in the maturity cycle and what is the differentiation that, that part of the stack has and how much are customers are willing to pay for it. And we do that exercise, Murray and I do that exercise, all the time and we constantly are then investing our R&D dollars appropriately. This is a problem that needs to be solved, and we just need to be sure that we're the best at solving it and what we have to offer, nobody else can offer. So I would say that, yes, there might be parts of that stack where we don't have the differentiation that we'd like to have, but I would not say that they've matured to the point where we should think about divesting them. I don't know, Murray, I'll let you...

Murray D. Rode

And I think one has to remember, too, that many of these products are still very sticky. Even if some of these niche products aren't growing, they do represent part of our maintenance revenue stream. They do help kind of enhance our overall footprint in a client and the upsell opportunity. So we're not thinking about divestiture at this point.

Operator

Our next question comes from the line of Steve Koenig with Wedbush Morgan Securities (sic) [Wedbush Securities].

Steven R. Koenig - Wedbush Securities Inc., Research Division

I'd like to ask you all maybe to talk a little bit about as we've seen another data discovery competitor become public recently, tell us about your differentiation in data discovery. And then just kind of a tactical question here, your sales and marketing spend was up pretty good quarter-on-quarter, and it's a little higher than we expected. Just, can you give us any color around that?

Vivek Y. Ranadivé

Yes, so Murray, do you want -- it sounds like you want to take that. Go ahead. Murray, it's all yours.

Murray D. Rode

Yes, we're both keen to explain the differentiation. I think the big thing in this data discovery space is that we would say Spotfire is the best combination of enterprise capabilities for a data discovery platform, along with the visualization capabilities and then the integration of things like statistics as part of the platform. So we would really argue, we're the best situated as an enterprise platform for data discovery.

Vivek Y. Ranadivé

And also, when you ask the 5 questions where -- how do you -- where is the data coming from, so nobody else has a bus to feed the data in. Then you say, "Okay. How scalable is it?" And nobody else has enterprise scale. Then you say, "Well, how easy is it to use?" And this is by far the easiest to use. And then you say, "Well, how much more can you do with it?" We own the S-PLUS language, and we can do statistical modeling with it. And then you say, "Okay. Having spotted these patterns, can I now instrument them and do something with it?" Well, nobody else can do that. So the fact is that those other companies are -- they have point products. They're not companies, they're more features and you need to answer all those 5 questions and we come out way ahead on all those 5.

Steven R. Koenig - Wedbush Securities Inc., Research Division

Great. And can you guys address the sales and marketing spend?

Murray D. Rode

Yes, I think that's just a function of the fact that how our license revs [ph] compared to last year versus the fact that we've kept the capacity up in our sales force. And again, I think the way to read that is our confidence about the future and the value of having that capacity ready going forward.

Operator

Our next question comes from the line of Matt Hedberg with RBC Capital Markets.

Matthew Hedberg - RBC Capital Markets, LLC, Research Division

In terms of the linearity in the quarter, I'm wondering, how did business progress? Was it sort of typical seasonality this quarter? And maybe 3 weeks in to June, are you seeing things continue to improve? Or just walk us through that a little bit.

Murray D. Rode

Yes, linearity on the quarter was pretty -- was really pretty typical, and I'd say we feel good about the start of the quarter, the start of Q3. We also, I think, mentioned earlier in the call, we like the way the pipeline looks going into Q3 in terms of the mix of deals both big and mid-sized.

Matthew Hedberg - RBC Capital Markets, LLC, Research Division

And then -- that's helpful. And then maybe a follow-up on the government side, it's been pretty consistently about 6% for the past 4 or 5 quarters. I'm wondering, going into or approaching the September U.S. federal yearend, do you see government business picking up at all, or should we model that kind of around that 6% range?

Murray D. Rode

I think it's safest to be conservative around the government business. I think that's still one of the verticals that is a bit challenged.

Vivek Y. Ranadivé

Yes, we have new leadership there also. If -- hopefully, none of them are listening, and if they are, they should be out selling.

Operator

Our next question comes from the line of Derrick Wood with Susquehanna Financial.

James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division

My question, Murray, the percentage of revenue from the top 10 customers came down quite a bit to 15%. I think that's the weakest I've seen on record. What was the dynamic there? And do you think that -- is there a reason for that to move back up, or is there a reason for that to stay down? Some color on that would be great.

Vivek Y. Ranadivé

Derrick, I'd like to take exception to your choice of words in that because I would've thought you would've said that's the strongest we've seen, and we've worked hard to show that we're not dependent on our top 10 customers. And so -- but anyway, Murray, I'll let you respond to that.

Murray D. Rode

That's -- no. That's the essence of it that -- I mean, just the deals over $1 million are going to have a big influence on that percentage from top 10 customers. And as Vivek said, I think we look at hitting the range on license without maxing out on big deals as a positive on the quarter.

James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division

Yes, okay. And I guess, Vivek, one for you. Last quarter, you talked about seeing more competitive pressures out there from the large vendors. Has that changed at all? Or have you kind of had a different cadence in how you go to market and sell against those competitive pressures?

Vivek Y. Ranadivé

Yes, so what was -- what I said last quarter was that what was happening is that we would win 10 out of 10 of the technical votes, and then we would lose the deal. And we saw this happening a few times to the IBMs and Oracles of the world, and they have adjusted their positioning to say that they were good enough. And so we went methodically and really focused on messaging and our execution so that we got the message across that good enough isn't and here is why. And so that has actually paid off and we didn't -- to my knowledge, there was not a single deal that we lost this quarter from that. So we feel that our competitive positioning is back where it should be.

Operator

Our next question comes from the line of Mark Murphy with Piper Jaffray.

Mark R. Murphy - Piper Jaffray Companies, Research Division

Murray, could you ballpark for us how many employees roughly you have in the Spotfire business unit? Is that around 400?

Murray D. Rode

Let me think about that for a second. Yes, yes. Yes, a little bit under that. You're a little bit high on -- no, no, sorry. Yes, it's about 450 for Spotfire.

Mark R. Murphy - Piper Jaffray Companies, Research Division

About 450. Okay. So the reason I asked is that just given the valuations on companies like Tableau and Splunk, that are publicly trading, is it theoretically possible to maybe unlock some value hereby allowing us to see the stand-alone trajectory, which I guess you gave us on this call of, I think you said 30%, but just also the scale of Spotfire one way or another?

Murray D. Rode

Well, I think that we see Spotfire as a pretty integral part of the story. And some of Vivek's earlier comments earlier in the call, I think you got a flavor, too, of how we see Spotfire fitting in with the story. It's very complementary to what we're doing with this turning customers into fans solution approach. It's complementary to the integration platform. It's complementary to what we're doing with machine data and the LogLogic business, et cetera. So right now, it being part of a bigger story, I think, is an important part of the overall strategy.

Vivek Y. Ranadivé

Yes, in fact, Mark, I would say that if you're talking about industry and unlocking value and all of that, I would say the reverse is true. I don't believe that those guys can survive as stand-alone companies. What they offer is a point product, and what I had said earlier is that how do you get -- how do you feed those products, and I talked about 5 different things you need to be able to do and they can perhaps do one of them and not even at the enterprise level. So in fact, we went through this years ago, when people said to me that, well, if you were just a message broker company, then whatever, Crossroads or Mercator is more valuable. And those companies are all gone. And so yes, right now people are looking at these companies, but let's see what happens in a few years because it's really that they can't stand alone. They need the rest of the stack in order to feed the data and make sense out of it and do everything else. So we believe very strongly that you need that whole stack.

Mark R. Murphy - Piper Jaffray Companies, Research Division

Yes, okay. That makes sense. That's a good point, I think. And I wanted to ask you, Vivek, as well, just given some of the recent commentary out there about the pricing and bundling pressures, specifically coming from Oracle and IBM and some of their tactics, have you taken a look at what you think your price elasticity curve looks like for, hypothetically, if you were to drop list prices 20%, could you do 30% more volume and net out positively or vice versa? Is there any way to think that through? Maybe if you were to match your competitors on price with a superior product and just take the issue off the table and maybe you'd be able to crank out a lot more volume?

Vivek Y. Ranadivé

I think there's instances where that's probably true, Mark. And we can -- we think about that a lot. We think about are we too expensive, what are places where we need to be more flexible. And time and time again, where we come out on it is that our value add is such that we should be able to command that kind of pricing power. Now as we start getting into more cloud-oriented offerings, then in those areas, we will be much more price-sensitive and we'll make it easy for people to consume our software without having big spends and big chunks that they need to go through before they get up and running. So I think there's areas where that lends itself, and it's probably more in the cloud areas. So for example, with Loyalty, we want to make it easier so people can do it, or with tibbr, we're going to make it easier. And so we're constantly looking at that and that's a big question, and it's something we keep thinking about.

Okay. We'll now conclude our call. Thank you, all, for joining us, and have a great day.

Operator

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may all disconnect.

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