I2 Conference Call Notes
General feeling was euphoric, from the I2’ers and the analysts. The call actually went on a half hour longer than anticipated as there was a long line of questioners waiting. Dain Rauscher even slipped in a spectacular.
The main thrust of the call was to emphasize i2’s complete solution footprint. The value proposition to its customers, they believe, particularly in a slowing economy, is unmistakable, as is the rapidity with which I2 can help those customers transform themselves through its comprehensive offerings. Participants stressed that I2’s edge rests with its ability to integrate across companies—and on any platform, something its competitors have not achieved.
Highlights:
Revenues: milestone, crossed $1billion mark, up 115% sequentially and license revenues (to $243m) up 120%; up (at $1.126b) 97% y/y (year ago consensus was $875m)
Software licenses especially strong—run rate at $1.5b extrapolating
Operating income: up 160%
Eps: Q .09, Y .26 (pro forma)compared to .05 and .09, respectively
Gross margin: 74% for quarter, Y/Y declined slightly due to IBM fees
Operating margin: 17% for quarter, 14% for year
Bill Beecher, CFO:
Numbers reflect success of model. Investment in r&d is paying off.
580 sales reps (253 at beginning of year)
1875 r&d people (r&d expenses, as anticipated, came down)
cash flow: $60m for quarter, $185m for year (noted here that i2 does not book in-process; sales are not recorded until cash is collected, so figures exclude most end-of-quarter business)
for first time, gave public guidance (earlier presentations talked only of visibility):
Q1-01: $361m revs, $220 from licenses
Eps: .06 pro forma
Y01: $1.64b, $1.02 from licenses
Eps: .37 pro forma
Ramesh (from Aspect):
Milestones for 2000:
1. $1b in sales, with growth accelerating almost 100% (97%)
2. acquired Aspect and integrated it successfully—largest software acquisition
3. created $75b in value for its customers because of complete solutions footprint
4. deals that transformed companies—Siemans, K-Mart, Caterpillar
5. partnerships
6. innovation and deepening of product suites
7. positioned for continued leadership
On footprint: What customer wants is not addressed by 80% of IT budgets, which are directed at financial and ERP systems. I2’s customers don’t care about this “tinkering”;
They want more fundamental tools. In slowing economy, CEOs focus on revenue growth and improving margins. Siemans said I2-assisted transformation created $10m euros in benefits.
Greg Brady, Pres:
1000 customers in over 9000 installs of products gives i2 domain expertise. Brady doesn’t see significant competition. Of 111 deals, won 75%. Hitachi was a significant win against Oracle, and NOK had a SAP install base.
Key components of 5-year strategy:
1. multicompany solutions (planning and transaction—customer relationship, supply chain, and supply management). ERP is, at best, a single enterprise solution and different divisions run differently
2. imbedded physical execution
3. content—developing a common communication language
4. network—managing commerce across the internet
5. i2 is the 2 in B2B, helping customers and helping itself
i2’s suites can:
1. integrate to any platform, and supply chain is a multi-company problem
2. its design collaboration and strategic sourcing present single face to customers regardless of how many divisions a company has
3. manage entire transaction
4. complete order management that is not possible with ERP systems, so orders can be brokered across any number of companies
5. industry indifferent—works in all sectors
TradeMatrix—showing network effects of dynamic brokering
Reached a benchmark with IBM—2000 dynamic connections/second
100K suppliers available, with 20m parts and components
i2 is an ecosystem of its own—integration of its suites is its competitive weapon
can integrate across companies where ERP has to be rearchitected to do this
Sanjiv Sindhu, CEO
Has not seen slowdown—proof is in the numbers
Huge value i2 product suites bring put them on top of CEO’s priority list
$1billion revenue milestone is history
looking to $5b now and i2’s “stars are aligned”:
1. underpenetrated markets
2. one-stop shopping
3. huge value for customers and provide it quickly
Q&A:
Dain Rauscher:
What is driving up asp’s?
Winning collaborations or content on someone else’s platform
Cross-selling: supply chain, supplier relationship management, and customer relationship management
Rick Sherlund—Goldmans
Any sense of customers’ IT spending priorities?
Sales were polled. Do not see pullback even though there is some economic slowdown on other fronts. On supplier side, suites help reduce costs. On customer side, increase revenues and efficiency.
ING Barings
Percentage of recurring or term licensing? And where is growth?
6 new term, 10 transactions, fell out in proportion to revenues generally
Supply chain is taking off; procurement leveling off
Charles Phillips, Morgan Stanley
Any order management installations gone live?
Live on one this quarter, couple of others sold and starting implementation
Solomon Smith Barney
Some visibility on private/public marketplaces?
Marked trend to private, public peaked in the third quarter
The private marketplaces focus on supply chain management so the trend favors i2
Dresdner
Any insight into sales process in the public/private marketplaces? And new versus installed?
I2 doesn’t characterize (as some of its competitors do) a new customer when we sell to another division of a company that is already a customer
With private marketplaces, there is greater potential to
Great unanswered question: When did you say you’d reach $5b? Two years or three?
Goldmans
Any comment on Oracle’s recently announced products?
We have not seen in the market. The new apps are only in their installed base
Unterberg Towbin
Is there a tick down in r&d?
No, reclassification of Aspect employees, net gain of 75 heads in r&d?
Any weakness in CPG?
No.
Thomas Weisel
Any transformation successes with IBM like those at K-Mart, Siemans, and Caterpiller?
Yes. Corporate Express has signed on for a complete transformation (details not made public)
Robinson Humphrey
Hire fewer sales people than anticipated or some leave?
No. Hired to business objectives, slows in fourth quarter.
Guidance on margins?
Operating margin grew by 2%, stand by that going forward.
Prudential
WRT i2’s position in e-business, what mix is from original advance planning suite?
(Sanjiv): Whole suite is necessary, we don’t break it out into old and new. Both customer and supply chain management. |
