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Executives

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

Murray D. Rode - Chief Operating Officer

Sydney L. Carey - Chief Financial Officer and Executive Vice President

Analysts

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

Brent Thill - UBS Investment Bank, Research Division

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

Kash G. Rangan - BofA Merrill Lynch, Research Division

Gregory Dunham - Goldman Sachs Group Inc., Research Division

Karl Keirstead - BMO Capital Markets U.S.

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

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

Brad A. Zelnick - Macquarie Research

Brad Reback - Stifel, Nicolaus & Co., Inc., Research Division

Mark R. Murphy - Piper Jaffray Companies, Research Division

Jesse Hulsing - Pacific Crest Securities, Inc., Research Division

TIBCO Software (TIBX) Q3 2012 Earnings Call September 20, 2012 4:30 PM ET

Operator

Good afternoon, ladies and gentlemen. I'm Dustin. Welcome to TIBCO's Third Quarter 2012 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 one month following today's call by dialing (800) 585-8361 -- excuse me, it's 67 or (404) 537-3406 internationally. The confirmation code is 28093687.

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 margin, 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 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 presenters on the call are Vivek Ranadivé, TIBCO's Chairman and CEO; Murray Rode, Chief Operating Officer; and Sydney Carey, Chief Financial Officer. I'd now like to turn the call over to Vivek.

Vivek Y. Ranadivé

Hello, Dustin, and thank you all for joining us today. I'll begin with highlights of our Q3 performance and offer some remarks on the broader environment before turning it over to Murray and Sydney to discuss further details.

We delivered another quarter of solid growth in Q3, with total revenue increasing 18% and license revenue increasing 14%, respectively, on a constant currency basis. As reported, total revenue came in at $255 million. License revenue was $99 million. Non-GAAP operating margins were 27%, and our non-GAAP EPS was $0.27.

This quarter's environment reflected some familiar themes that I've been discussing for some time. First, we continue to see what I believe to be early signs of growing dollar commitments to our platform. While enterprise IT budgets are steady, many corporations are preserving the flexibility to pursue strategic initiatives, if such a purchase can be proven to move the needle and deliver what I call "extreme value."

Second, the trend towards marketing as a department of influence in CMOs with growing budget authority continues. Every business is realizing that it has a social network. And if the value of the business is x, the value of the same business that is able to leverage its social network is multiples of x. TIBCO is helping our customers capture, engage, expand and monetize that social network and turn customers into fans. Fans are loyal. Fans evangelize. And fans are committed to your success.

By moving away from stale transactional approaches of the past such as CRM, enterprises today can capture every event and every interaction of a customer and help customers traverse the path from sentiment to intent and from intent to action. Most companies are only now beginning to talk about sentiment, and once again, we're 2 steps ahead in helping the enterprise build a network of fans.

Third, the world continues to move in our favor. You guys call it big data, but what is big data? There are some old companies down Highway 101 that will have you believe bigger databases equate to big data. There are log management companies that say machine data is big data that show [ph] collaboration companies that say they have big data, analytics companies that analyze big data and so on. The truth is, TIBCO has the complete platform that allows you to transport big data, introspect it, find patterns, create rules and take actions. And of course, there is our $1 billion back-end. In order for big data to be useful and actionable whether on the trading floor, the carriers network or in the shopping aisle, it requires back-end integration: integration of your people, your systems, your data. It requires you to marry data at rest with data in motion across mobile, social, cloud and on-premise environments. And it has to be in realtime for it to be truly impactful.

TIBCO has the complete stack. Now a certain fact or subset of this problem might appear simple and compelling enough, and it might offer growth off of very low numbers, but we've actually done the hard part. The fact is our platform works, it's proven and we have the goods. Only TIBCO can process 1 million transactions per second and identify fraud in realtime for one of the world's largest smartphone manufacturers, in just more than 2 billion events a day for major a communication services provider, service the low latency standard for an exchange trading a quadrillion dollars in contracts annually, help a global consumer products company annualize and discover new insights, over 8,000 product categories, 100,000 products SKUs and across 175 markets every single day.

At the same time, we're enabling a tiny 10-person New York-based start-up to place exactly the right ad in the right place at the right time using BusinessEvents, our in-memory context engine. We’re helping a women's retailer send targeted promotion on realtime inventory. And we're enabling the Oakland Raiders fans to get realtime offers for tickets and merchandise when they’re near a Raider image retail store, extending the fan experience beyond the game and stadium.

Every single company, big and small, has 3 requirements: they need to find a way to grow revenue with existing customers, do more with less in their supply chain and manage risk. It turns out that all of these are big data problems, and you need a complete platform to be able to solve them.

In closing, there has never been greater excitement around the company. Amidst ups and downs in the global economy, typical summer seasonality and currency headwinds, we continue to grow our business on a strong and steady basis.

Next week, we kick off where I'm confident will be our most successful user conference TUCON ever. Our paid customer attendees are up 40% over last year. We're seeing unprecedented commitment from our partner sponsors. We have a fantastic and exciting agenda in store. We hope to see you there.

Finally, in recent weeks, there has been some rumor and innuendo including that we're having a 10% risk. I just want to be clear and put this to bed once and for all. There is no 10% risk. In fact, our field personnel is up 10% sequentially. We have our biggest pipeline ever. We're not slowing down our investments. We're doubling down. After all, we believe our market represents the largest opportunity in enterprise software.

Now I will turn it over to Murray.

Murray D. Rode

Thanks, Vivek. I'll cover some key operating metrics for the quarter and then turn it over to Sydney. Note that when I speak of regional or product growth rates, I'm presenting them in an as-reported basis and not adjusted for constant currency.

I'll start with our license transaction numbers. During Q3, we had 134 deals, over $100,000 in license revenue, up from 126 a year ago. We had 16 deals, over $1 million in license revenue, as compared to 21 a year ago. This count obscures the fact that our larger deals actually contributed more than normal to the quarter. So in general, we continue to see good large deal performance. Our average deal size this quarter for deals over $100,000 rose to $676,000 versus $658,000 last Q3.

And our top 10 customers comprised approximately 24% of our total revenue versus 22% a year ago.

Looking at the geographic mix, total revenue was as follows: Americas at 54%; Europe, Middle East, Africa at 35%; and Asia Pacific and Japan at 11%. The Americas was the top performer this quarter, growing 19% over Q3 of last year. Asia Pacific, Japan, grew 11% on the quarter. That understates some notable strength in Japan and what we refer to as the broader Asia market, which for us means mostly Southeast Asia or countries outside of China and Japan. In fact, year-to-date, this segment is up 49%.

EMEA this quarter was flat over last year without considering currency effects, but it's also important to bear in mind that our European business is the most susceptible to summer seasonality and had a very strong start to the year. On a year-to-date basis, EMEA is up 14%, again without considering currency effects, while Americas and APJ are up 15% and 22%, respectively.

In terms of our sales capacity, our quota hiring slowed a little given the summer season, but we still grew quota carrying headcount to 280, up 27% over last year.

Shifting to vertical markets, we had 8 different industries deliver 5% or more of total revenue as follows. Financial services comprised 23% of total revenue; communications, 12%; life sciences, 12%; energy, 8%, manufacturing, 8%; and government, transportation and logistics and retail, each between 5% and 6%. Life sciences more than doubled this quarter. Transportation and logistics grew by 64%, retail by 33%, and finance grew by 18%. Overall, on a year-to-date basis, we continue to see more mainstreaming in our business with good growth across both new and traditionally strong verticals.

The breakout of license revenue among our major product families was: SOA, 47%, business optimization, 44%; and BPM, 9%. Business optimization was the clear business driver, up 63% from last year, led by a strong quarter from Spotfire. The overall categories for SOA and BPM didn't expand in the quarter, but the within these categories, we saw real strength from both core SOA products and from AMX BPM, denoting growth around core platform sales.

For the last few quarters of this year, we've also discussed how BusinessEvents is becoming integral to more deals, and we've seen just that as the number of deals that include BusinessEvents has increased by 21% year-to-date. Overall, on a year-to-date basis, SOA is up 3%, business optimization is up 26% and BPM is up 26%.

In general, our third quarter can have some challenges due to the impact of the summer months. Despite this, we feel we’ve had a good mix of business and a strong showing from key products, as well as good geographic and vertical diversity. We also feel we are well positioned for Q4 with a strong pipeline across the board.

And with that, I'll turn it over to Sydney.

Sydney L. Carey

Thank you, Murray. I will provide additional details on our financial performance in Q3, and then I will provide comments on our financial outlook for Q4. I’ll review our financials on both a GAAP and non-GAAP basis. A full reconciliation was included with press release, along with an explanation of our non-GAAP measures.

The key performance data on our third quarter results are as follows. Total revenue was $255 million, up 11% year-over-year on an actual basis but up 18% on a constant currency basis. License revenue was $99.1 million, up 9% year-over-year on an actual basis and up 14% on a constant currency basis. Services revenue was $155.9 million, up 13% year-over-year on an actual basis and up 21% on a constant currency basis.

Non-GAAP gross margin for Q3 was 74%, in line with last year. Non-GAAP operating income was $68.8 million, up $11 million or 19% from the same period a year ago. This resulted in an operating margin of 27%. Non-GAAP EPS was $0.27 versus $0.23 a year ago. We estimate the currency impact to earnings to be a negative $0.04.

Q3 cash flow from operations totaled $48.4 million and, on a year-to-date basis, totaled $165.3 million, which is an increase of 15% from the same period a year ago.

Moving down the balance sheet. Deferred revenue, including both long- and short-term components totaled $280 million, up $49 million from Q3 of last year for an increase of 21%, or 28% on a constant currency basis. Sequentially, deferred revenue increased $27 million with the increase due to growth in deferred license, the majority of which will be recognized as license revenue over the next several quarters.

DSOs for Q3 came in at 73 days versus 68 days a year ago. Also during the quarter, we spent $32 million in share repurchases, buying back approximately 1.2 million shares.

As we look forward to Q4, we are seeing strong pipelines across all geographies with a broad mix of opportunities. We continue to see a 3% to 4% currency headwind on revenue with a larger impact to earnings.

Our guidance for Q4 is as follows. We expect total revenue to range from $310 million to $318 million. On a constant currency basis, this represents growth of 11% to 14%. We expect license revenue to range from $148 million to $156 million. On a constant currency basis, this represents growth of 13% to 19%. Note that our growth rate on services and, therefore, total revenue is being impacted by our quarterly calendar, which has 5 fewer days in Q4 2012 than Q4 of 2011.

The non-GAAP operating margin is expected to be 33% to 34%. Non-GAAP EPS for the quarter should range between $0.42 and $0.44, with an assumed tax rate of 27%. We are estimating the impact of currency on earnings to be a negative $0.03. GAAP EPS should range from $0.32 to $0.34 with an assumed tax rate of 20%. Our actual GAAP and non-GAAP tax rates can vary depending on the mix of foreign versus domestic profits. For 2012, on a constant currency basis, we see total revenue growth at 17% to 18% and license revenue growth of 15% to 17%.

With that, we'll be happy to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of John DiFucci with JPMorgan.

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

Sydney, you said that this was -- well, you pointed it out, but it was a huge increase sequentially in deferred revenue, and you pointed out that a part of that is deferred license revenue, that $27 million sequential increase. Can you tell us about how much of that, even roughly, is deferred license?

Sydney L. Carey

Well again, the bulk of that category is going to remain deferred maintenance. We don't actually break out deferred license. The increase sequentially was all due to license. Historically, our Q3, we see it as a little dip in the deferred due to our maintenance renewal cycle. But we have several license deals that kind of come and go out of deferred each quarter. And this quarter, we had a good quarter where we saw some license deals come in.

Vivek Y. Ranadivé

Yes, so the bulk of it is deferred license at this time.

Sydney L. Carey

Yes, yes. The sequential increase is deferred license.

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

Okay, great. And then also aligned with that, accounts receivables actually jumped pretty -- jumped up, which sort of makes sense. Usually I think some of the larger deals will close near the end of the quarter and even though somebody might be invoiced, they may not have paid yet. Is it fair to say that, that's likely to have a positive impact on cash flow in the next quarter?

Sydney L. Carey

The increase in DSO and the increase in accounts receivable was primarily due to the increase in deferred, and we do expect to see that deferred to roll out and come into revenue over the next several quarters. And it should have a positive impact on cash flow.

Operator

Our next question comes from the line of Brent Thill with UBS.

Brent Thill - UBS Investment Bank, Research Division

The last quarter, you mentioned you were somewhat disappointed with the Americas region. I was curious if you could just update us on the trajectory of the Americas business and the things that you're doing there to get it back where you'd like. And I had a quick follow-up for Murray.

Vivek Y. Ranadivé

Yes. So we really have made a lot of progress. And so both in the Americas and the Rest of the World actually, we're very pleased with where we're sitting. We have like the biggest pipeline that we've ever had in our history. It's about -- it's close to $0.5 billion right now. And a lot of that is from the Americas. And so we're very pleased with the progress we're making. It's still a work in progress, so we've got a drill in place. We're very, very systematic on process and how we're doing things. We've also identified some possibilities for leadership, and we have some good options. But we're not -- we're going to take our time in what we do there. So we're heading in the right direction. There’s still work to be done, but we're very pleased with where things are. Murray, do you want to add anything?

Murray D. Rode

There was a follow-up, though, Brent?

Brent Thill - UBS Investment Bank, Research Division

Yes. Just -- Murray, just on the sales hiring, you said it slowed a little. I think you gave a target for the year end at 300 to 310. I'm curious if that still stands, or are you going to back off that a little? And I guess just as a follow-up, your license -- or sorry, your software sales rep hiring is outpacing the license growth, so is there going to be a point where you think we'll get to kind of parity where you start to see those sales reps become productive and producing more? Or is it just taking a little bit longer to get those reps productive?

Murray D. Rode

Sure. So the target for the end of the year of roughly 300 to 310 is still in place. So we do expect to keep hiring through the rest of the year. And I think you do point out a good point, which is we are ahead of the curve with hiring. And that's -- you can see that as a leading indicator of our sense of the opportunity. So obviously, we do expect once those salespeople are fully enabled for that to reflect itself in the business.

Vivek Y. Ranadivé

But the metrics actually show that -- Sydney, right, that if you look at attainment average and all of that, that's within where we want it to be.

Sydney L. Carey

Yes, I mean, if you consider a 6-month ramp and just look at average attainment, we're not far off of where we've been in prior years as far as average attainment. So we're getting them ramped, and I think it's just again -- we're looking at the opportunity that's ahead of us.

Operator

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

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

The revenue came in at kind of the lower end of your range. Was there anything kind of at the back part of the year that caused a little weakness? Or would you attribute maybe a little bit more going into deferred than expected that maybe caused you to come in at the lower end?

Vivek Y. Ranadivé

Yes, we -- yes, there was stuff that we put into deferred, and so that is some of that. But if you actually look at our constant currency 18% growth rate, it's almost -- it's actually exactly the same as it was a year ago. So we see that. I think the currency headwind was there. But if you also look at what I call the slugging percent hedge, which is kind of my term, but if you look at our license growth plus the change in deferred license, then we don't -- I kind of look at this privately, but it was actually way ahead of where we were a year ago. So we think that the demand is very, very strong. We’ve just got to keep executing. Sydney, do you want to add anything?

Sydney L. Carey

No, I think that's it.

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

Do you have the deferred license numbers?

Sydney L. Carey

We're not going to get specific on the deferred license number, but what I did state earlier is that the sequential increase from Q2 to Q3 was all license. We did have some license in Q2, so it's larger than the $27 million, but all of that increase was due to license.

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

Okay. And that's great, I mean, and at the midpoint of guidance for Q4 on a constant currency basis, you are guiding for license growth to accelerate. And so, I mean, I guess you see the end markets being fairly healthy in your big verticals like telco and financial services, and you expect pretty good seasonality in Q4. Any concerns? Or you feel good about the spending conditions in your end markets?

Vivek Y. Ranadivé

Yes, we feel good, Derrick. As I've said, we’re sitting on almost a $0.5 billion pipeline right now. We've never ever been in anything close to that position. And we're seeing small deals, midsized deals, large deals. We're seeing them across geographies. We're seeing them across industries. So we're aware that there's economic turbulence out there. So we're just being cautious, and we're working hard. And we feel good about where we're sitting right now.

Operator

Our next question comes from the line of Kasturi Rangan with BoA Merrill Lynch.

Kash G. Rangan - BofA Merrill Lynch, Research Division

My question for you guys is this phenomenon of putting more deferred license revenue is a relatively new one, if I can recollect. And I doubt if we had a similar magnitude of deferral on your balance sheet from Q2 to Q3 last year. So if I just do the rough math, I mean, you have pretty stunning license bookings growth rate. I mean, it looks to be well north of 30%, 40%. What is going on? Can you talk to any broader underlying trend that is manifested in your business? And what is the right way that Wall Street should be thinking about license growth versus license billings growth? And what are some of the metrics that you're going to be sharing with us on a go-forward basis if indeed this is not a blip?

Vivek Y. Ranadivé

Yes. So Kash, what we're seeing, and again I'll defer to the smarter people, Sydney and Murray, to talk about metrics and things like that. But what we're seeing is that if you have something that is a game-changer that represents extreme value, people are willing to spend on it. And so we're seeing people willing to put big bucks on the table to move the needle. And so we're working on a project right now for one of -- for a very large technology company, a mobile phone business and so on. And we're going to -- they want -- the only company that can do this for them is us. It's 1 million transactions a second, and just one application of that fraud will save them $400 million or $500 million a year. So those are the kinds of value propositions that we're seeing, and they translate into us being able to get big license numbers. So Sydney, you'll get back with metrics and so on. But we're seeing very, very strong demand. We're seeing people willing to put big money on the table to solve big problems, and they're giving us the opportunity to do that.

Sydney L. Carey

Yes, I mean, there's a variety of factors on why something goes into deferred. We have a lot of transactions in deferred license. The majority of the increase was from a handful of transactions, and we expect to see those roll out. And I'm sure, in the future, we'll have reasons where other transactions will come into deferred.

Operator

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

Gregory Dunham - Goldman Sachs Group Inc., Research Division

Two quick ones. Spotfire, I see you guys highlighted as the strong performer this quarter, which is encouraging given the performance last quarter. So the question is, was last quarter just a blip from a strong Q1 and this quarter is more of a trend, and that's kind of how you're seeing it going forward? That will be my first question. And then a separate question. You mentioned, if I heard on the Q&A earlier about looking at leadership in regional -- the U.S. from a sales perspective. What's the timeframe on that? And how should we think about you filling that position?

Vivek Y. Ranadivé

Yes, so on Spotfire, yes, we expect to go from cent to cent, and we feel very good about where we sit. Everyone needs that kind of visual analytics. If you happen to be in Las Vegas next week at our user conference, you're going to see what we're doing with Spotfire. And basically, every company that bought sort of the 20th century BI tools, every one of them needs Spotfire. So huge demand for that. In terms of timing on leadership, so we're not going to do -- we're going to take our time, and it could be 3 to 6 months before we actually put -- we're being very, very cautious and deliberate about it. So that's kind of the timing on that.

Operator

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

Karl Keirstead - BMO Capital Markets U.S.

I had a question on the core SOA business. It looked like, by business, it was the unit that was down in the quarter. But then you mentioned in your prepared comments that the core SOA was strong. I'm wondering if you could add a little color, maybe describe the core that was good and then maybe some of the other "non-core" that might have slipped a little bit.

Murray D. Rode

Sure. So SOA has gotten to be a pretty big category for us. So it also holds to the extent you could call something legacy in our product stack, it also has all of those products. So it has everything from mainframe to EDI, to adapters, to messaging, to the actual SOA products, which include ActiveMatrix and the related governance suite and our core integration technology, et cetera. So it was really the ActiveMatrix products that were strong within the category and kind of the other odds and ends that weren't so much. So we actually saw in terms of SOA sales of the quarter a real concentration around more pure SOA product.

Vivek Y. Ranadivé

So the newer products were strong. The more mature products were less strong. Is that fair to say, Murray?

Murray D. Rode

That's exactly it, yes.

Karl Keirstead - BMO Capital Markets U.S.

Okay. That's good color. And then just a question on the fourth quarter revenue guide. It looks like your license guide is going to meet expectations, but the total revenue guide is a little bit light. That's clearly because of the services. I'm just wondering, is there anything other than the fact that maybe the November quarter has a few fewer days? Anything else going on in the services side that might help us?

Sydney L. Carey

Yes, we're seeing continued strong demand for services. We're hiring in services as fast as we can. It's the number of days, again, having 5 fewer days in the period as compared to last year, as well as we're seeing currency headwinds as well. So if you kind of normalize both of those, we see the services growth rate more in the 15% range than the 5%. So we're seeing great opportunity in the services line.

Operator

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

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

I just had 2 quick questions, if I could. On the deferred license, I know you've spoken a lot about that. Is that mostly perpetual? Does that come out pretty quickly? Or there are term deals in there where that is recognized ratably over a term? And then the second question is you've talked a lot about sort of moving more to a platform or sort of customers looking more at platform-type purchases. What's your expectation to ASPs longer term if that trend continues?

Sydney L. Carey

So in regards to the deferred license, the increase is primarily a perpetual type of licensing. But within the overall broader category of deferred license, there is subscription-based business as well.

Vivek Y. Ranadivé

Yes, on the -- we are starting to see the ASPs creeping up because that's -- you're 100% right. As people decide that they just want the platform, then obviously, it's going to -- the price tag on that is quite a bit higher. But we're not -- we'll wait and see how that rolls out. We've been a little surprised at how people are jumping and just saying, look, we just want the whole platform. But we're not going to make any commitments about how that plays out. But ASPs will creep up.

Operator

Our next question comes from the line of Steve Koenig with Wedbush.

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

Let's see. I want to ask, just dig a little bit more into execution in the quarter. Can you comment on linearity? And then how did -- any color on how the macro environment impacted you? And aside from the macro, are there any execution improvements you want to make at this point, for example, in the Americas, just building on John's earlier question? And I do have one follow-up, if I may.

Vivek Y. Ranadivé

So we are really focusing our attention on the Americas because I wasn't satisfied with the way we executed. And so we are putting laser-like focus into that. We had the seasonality that we see in the summer and just how the quarter plays out. And what we're trying to do is we're kind of taking actions now so that in the next year or 2, it will be less -- it will be more spread out. And so we have this process and this drill that we put in place. And we're already starting to see dividends from that, even in the fourth quarter, even as early as this quarter. So we're just really focused on -- we're very pleased with the leadership we have in the other regions. But right now our focus is on the Americas. I don't know. Murray, do you want to add anything to that?

Murray D. Rode

I think that, that focus on the drill and on the forecast still continues. I think for us, it's really a continuous improvement process to get better and better at managing our pipeline, scrubbing our pipeline and managing our forecasts.

Vivek Y. Ranadivé

Yes, and also one of the other things we're focused on is just training. We've hired a lot of the foot soldiers, and I think the metrics show that actually we're doing well with them. But then we also need to make sure that we're growing the top end of the pyramid and the kind of the generals, the field marshals. And those are people that you can't really just go hire from the outside because you go to the 20th century companies, and they know how to sell databases and transactional systems. And they're less comfortable selling event-driven big data-type systems. And so those people tend to be more homegrown, and so we are paying more attention to identifying those people, putting them in positions of leadership, giving them the coaching and the training that they need so that they can fill those roles. So there's just a lot of blocking and tackling that we're investing right now.

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

Okay. And then if I could shift gears for the follow-up. I was really struck earlier this week by listening to a large CRM company up the highway from you guys, how similar their vision now sounds like what you've been laying out, particularly with tibbr, and that has to do with the social network being able to comprise devices and machines and having a back-end that can allow you to do that. I was really struck by the similarities there. And I'm just wondering, now that the visions actually sounds somewhat similar and both companies are actually trying to -- you guys are trying to evolve into having more front-end offerings for business users. I think they're trying to evolve into having more of a back-end. What differentiates your vision at this point, Vivek? What do you do next to stay one step ahead of the game here?

Vivek Y. Ranadivé

Yes, so we're the only ones who can really make the big data claim. So we actually can transport volumes of data unheard of, billions and billions of events. Nobody can touch that, especially as you start incorporating -- making machines part of the social network. We also have the full stack. And so with Spotfire, you look for the patterns. With BusinessEvents, you're codified into a set of rules. With ActiveSpaces, you're able to get a level of performance that nobody else can give you. And we're neutral, so we actually are the social bus. We integrate with every other platform, including the guys who -- the other guys in Northern California. So if you want to tie together SAP and Oracle and salesforce and your internal systems and some of the social networks, then we're really the only company that can do that. At Schneider, we've replaced 60,000 seats of Chatter with tibbr. But then, what they want to do is they also want a loyalty program. And nobody else can do that. And so when I talk about converting customers to fans, nobody else can even begin to talk about that. And then you talk about things like master data, like how do you keep -- have a clean list of customers, how are you going to do that? So the stack that we have, the back-end, they don't have the back-end. You need the back-end. It's a $1 billion back-end. It will take billions of dollars to create that kind of a back-end. So this is not -- if you're just looking at one type of data, then perhaps you can go with one of those. But if you want to truly create a social network that incorporates both machines and people, and then you want to be able to convert customers into fans and all the things I talked about -- so we're actually seeing less of them. And we're not -- it's not competition that's our biggest challenge today. It's just our own blocking and tackling. Just being there, training people, getting the proof of concepts right. People are actually starting to even pay us for these proof of concepts. They're so convinced that we can move the needle for them.

Operator

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

Brad A. Zelnick - Macquarie Research

I actually have 2 quick ones to sneak in. There's a lot of good things to see in the quarter here, especially the continued breadth across all the various verticals, as well as the strong large deal metrics, which leads to my first question for Murray or perhaps Sydney. On the large deals, is there any standout mega deal to speak of? And if so, can you maybe tell us a little bit about what drove that transaction? And then the second point for Vivek, I haven't heard tibbr mentioned once on the call. I'm very excited about it, and I just want to make sure that everybody at TIBCO is still very excited. And if you can just maybe give us a little bit of an update of what's happening with tibbr.

Vivek Y. Ranadivé

Murray, do you want to go first? And then I'll...

Murray D. Rode

Yes, sure. Brad, that was -- my comment in the prepared remarks about the deals over $1 million, we actually had a little higher concentration of larger deals. So there were several deals over $5 million, all of somewhat different characteristics. I would say, though, that we are seeing in larger deals, Spotfire playing an increasingly large role. It's not just the domain of infrastructure products anymore. Vivek on...

Vivek Y. Ranadivé

Yes, tibbr has just become part of the fabric for us. Now we have some deals where they were brought in by tibbr. So something like SanDisk putting 6,000 of their engineers or their company on it. That came as a tibbr deal. Or something like Cathay Pacific, where they're putting the airline on it. But then increasingly, it's just becoming kind of like a social bus where it's part of what we provide, and so what we did for the Raiders, it's just part of it. And then we have the other parts of the, I call it, the pearl necklace. We have the loyalty systems and the other things that go with it. So we're very -- it's just become mainstream. And so the reason I talk less about it is just like BE or loyalty or any of the other things, it's the social bus that glues everything together. And oftentimes, we don't even make it as visible. So to our customers, it looks like their system. And so Nielsen thinks they've got, I don't know, tens of thousands of people on it, and they think it's their system. CGI has, I don't know, 100,000 people on it, but it looks like a CGI system. Cathay Pacific, same thing. And so it's become part of our fabric. And it kind of ties everything together for us.

Operator

Our next question comes from the line of Brad Reback with Stifel, Nicolaus.

Brad Reback - Stifel, Nicolaus & Co., Inc., Research Division

So just a quick question. Last week, you announced the deal with PerkinElmer. It looks like they're going to resell the Spotfire product. Just love to get a little detail around that, how we should think about financial terms. And then longer term, are there other opportunities to get OEMs out there for Spotfire?

Murray D. Rode

Yes, so this is actually the culmination of an effort we've been working on for some time. That is building up the ecosystem of partners around Spotfire. And I think, I would point, too, to 2 big dimensions to the Spotfire strategy. One is how we're trying to take it much more broadly across industries and across deployments within companies. So beyond -- beyond just the heavy-duty user of analytics to broad adoption throughout the enterprise. So it's a very mainstream thrust to the business. And the PerkinElmer partnership complements that general strategy well because they excel in research markets and can focus on Spotfire and related applications in the research space. So it fits with our general strategy and their strengths very well. So we're very optimistic about that. We also have several other important partnerships in the works. Some of those announcements are waiting for TUCON, so we're not talking about them just yet on earnings, but they'll be out shortly as part of TUCON. And it's something, as I say, we continue to believe is an important opportunity for leverage in the Spotfire business.

Operator

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

Mark R. Murphy - Piper Jaffray Companies, Research Division

Murray, do you agree with the earlier comment that license bookings grew more than 30% year-over-year?

Murray D. Rode

I think so. I would probably want to double check the math carefully, but I think that's about right.

Sydney L. Carey

It’s about right, yes.

Mark R. Murphy - Piper Jaffray Companies, Research Division

Good. Now how do -- I'm trying to understand, how do we reconcile that? And Vivek, your comment that you're looking at your biggest pipeline ever, but you're guiding below consensus for next quarter. I mean, I guess, as we think it through, the other major variable really is close rate assumptions. So I'm just trying to understand if, for some reason, if you're being a little extra conservative with the close rate assumptions.

Vivek Y. Ranadivé

No, I think in license, we're right in the...

Sydney L. Carey

We're right in the ballpark. Yes, yes.

Vivek Y. Ranadivé

We're right in the ballpark. The services, there’s 5 fewer days in the quarter, and that's quite significant because a lot of our business is time-based for our maintenance and service.

Sydney L. Carey

It directly affects the services business and currency too just on a year-over-year basis. We're feeling that as well. So again, I think that on the license side, we're right in the ballpark of where our consensus with that. And on the total revenue, the factor of number of days, I'm not so sure that was originally factored into folks’…

Vivek Y. Ranadivé

Yes, so if you factor in the 5 days and the currency, then we're right there.

Mark R. Murphy - Piper Jaffray Companies, Research Division

So the calendar changed a little bit. I guess I'm looking at the currency. And to me, the currency impact is less negative next quarter. I'm just trying to make sure I understand that.

Sydney L. Carey

Well we're looking at services headwind of about 5%. And then the number of days changes about another 5% on services. So you factor it all in, and you're getting pretty close to where folks were at.

Vivek Y. Ranadivé

That's probably like a, I don’t know, a $15 million difference in total revenue when you do that.

Mark R. Murphy - Piper Jaffray Companies, Research Division

Okay. And then Sydney in terms of the license revenue that flowed into deferred, was it clustered more in any one geography versus another?

Sydney L. Carey

It was pretty broad-based. So no, it was not clustered into a single geography.

Mark R. Murphy - Piper Jaffray Companies, Research Division

And just to make sure that I understood the dynamics of that, in terms of -- to the extent that there was unusual magnitude there, are you saying that, that's primarily based upon ratable subscription revenue recognition? Or are you saying that there's an element of that, that's like tied to services milestones or something else?

Sydney L. Carey

No. I stated earlier, there can be many reasons that license will go into deferred and that the bulk of this is not related to subscription. It's related to other items.

Operator

Our next question comes from the line of Jesse Hulsing with Pacific Crest.

Jesse Hulsing - Pacific Crest Securities, Inc., Research Division

Sydney, just a follow-up on Mark's question. So the license bookings, would you say that it accelerated meaningfully in Q3? I guess I'm trying to get down whether there's been a change in trend in your business with -- related to deferred?

Sydney L. Carey

Again -- sure, so again, if you factor in the change in deferred sequentially, you would see good acceleration, above 30% on the license bookings. So yes, if you look at it that way, you would see the acceleration.

Jesse Hulsing - Pacific Crest Securities, Inc., Research Division

Okay. And your view on margin expansion, I guess, over the next few quarters. Your hiring’s in line or expected to be in line. Do you expect it to continue to tick up as it has been, stay where it is? What's your thinking on that?

Sydney L. Carey

When we're looking at Q4, we're looking at operating margin of 33% to 34%, which is in line to where we were last year. And kind of if you factor that in on the year, it kind of puts us right with just a little bit of expansion over where we were last year. We're about growth with leverage. But as we make these investments, we'll continue to get the leverage but at a slower pace.

Jesse Hulsing - Pacific Crest Securities, Inc., Research Division

And last question. I guess this would be for Vivek and Murray. When you talk about these platform sales, do you have to make major changes with how you sell it and who you sell to? And because of that, are you seeing sales cycles lengthen for some of your larger deals? And how do you expect that to trend moving forward?

Vivek Y. Ranadivé

Ironically, there is no lengthening of the sales cycle. It's similar to what it is for the mid-sized deals. We're -- no, it's really -- we are now targeting more of the business side. So to that extent, it changes. So maybe the marketing guy, maybe the CMO, maybe the head of the business unit. We, as I've said, we just need to build out the full organization, and so it does mean that the slightly senior guys are more involved. And those are people that we have, but we just have to put them in positions of leadership. So I think -- I don't know. Anything else, Murray?

Murray D. Rode

Only that when we talk about this notion of platform sales, and Vivek talks about the top of the pyramid are kind of the leadership and sales, our best salespeople have been selling a platform concept for a while. And I think really what's happening is our products and their ability to operate as a more comprehensive integrated platform have caught -- in a sense kind of caught up with some of those sales activities. So it's not really leading to any kind of change in fundamental methodology.

Vivek Y. Ranadivé

Yes, I think, in fact, if I -- I don't know the data, but I would say that the sales cycle is probably shorter for that kind of a sale.

Murray D. Rode

As the products fulfill the...

Vivek Y. Ranadivé

Because you're able to walk in and say, look, I can move the needle on your revenue. And it becomes a shorter sales cycle, so…

Operator

At this time, I will turn it back over to Vivek for closing remarks.

Vivek Y. Ranadivé

Well, thank you all for joining us, and we hope to see many of you in Vegas next week. I will now conclude this call. Thank you.

Operator

Thank you for joining us. We will now conclude TIBCO's Q3 2012 Earnings Call.

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