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TIBCO Software (NASDAQ: TIBX) has fallen 21% from its 52-week highs, which was set last October. The maker of tools for big data analysis and general business intelligence has struggled with increasing competition and spotty execution.

There has been some turnover in Tibco's executive offices and the company has added talent to its board room. After years of fictional buyout rumors, Tibco has officially hired a major investment bank to help with a review of strategic alternatives. Tibco may still decide to stay independent, but "strategic review" is often seen as a code word that means "looking for buyers."

With all of these balls in the air, Tibco is setting up to report third-quarter results after this Thursday's closing bell.

Analysts are looking for sales of $272 million, almost flat year-over-year. Adjusted earnings are expected to fall 36%, landing at $0.18 per share. These estimates are roughly in line with Tibco's official guidance.

But the simple earnings figures rarely tell the whole story. Here are three things to watch in Tibco's report if you really want to understand how the company is performing.

Sales execution
There's no question that Tibco offers valuable and often unique data analysis tools. The company has been a leader in its niche for a very long time. That's why Tibco is growing sales much faster than its largest traditional rivals.

TIBX Revenue (TTM) Chart

TIBX Revenue (TTM) data by YCharts

However, that's not good enough. Tibco also has to be able to sell these products, often in head-to-head bidding comparisons with several robust competitors. And that's where Tibco has stumbled in recent years.

Two years ago, CEO Vivek Ranadive first acknowledged that sales execution wasn't as strong as it could be in the crucial North American market. Tibco fired its head of North American sales and Ranadive was hoping for a quick turnaround. "We think we'll get back to where we'd like to be, very quickly," he said. "So, we hope that this quarter and next we'll again be firing on all the cylinders that we'd like to be."

The issues lingered longer than that, but Tibco has largely righted the American ship. North American sales have improved 10% over the last two years while Europe stayed flat and the Asian market shrunk by 21%.

Tibco still has execution issues, but they have moved to Europe and Asia. In last quarter's earnings call, COO Murray Rode outlined Tibco's efforts "to build out our ability to scale and execute consistently across our lines of business."

Look for signs of improved stability and execution. That starts with broad-based growth across geographies and product categories, and should be followed up by management comments about sales execution.

Margins
Tibco's gross margins have been deflating slowly over the last several years, and the company could never quite measure up to rivals Splunk (NASDAQ:SPLK) or Qlik Technologies (NASDAQ:QLIK) on this metric. However, the company is solidly profitable while its closest competitors are not:

TIBX Gross Profit Margin (TTM) Chart

TIBX Gross Profit Margin (TTM) data by YCharts

The flagging gross margins are the result of intensifying competition in the business intelligence market. There's not much Tibco can do about this, particularly since the company is looking for stronger sales execution. High margins and rising sales volumes are both perfectly fine goals, but it's hard to achieve both at the same time.

Tibco's operating profits are positive, but also caught in a downward trend. Trailing operating margins have dwindled from 16.5% to 13.2% over the last six quarters, hitting a low note at 5.2% in the second quarter of 2014. Look for Tibco to bounce back with stronger EBIT margins. Anything else could be a real reason for shareholders to worry.

Guidance
What it all boils down to is, what does Tibco's future look like?

Don't expect much talk about the "strategic alternatives" review this week. Anything beyond a simple reminder to focus on the quarterly report at hand would be an unexpected bonus.

But we'll certainly see management's official revenue and earnings guidance for the fourth quarter. And there's a little wrinkle here that could lead to confused investors.

For the year-ending quarter, analysts currently expect non-GAAP earnings of roughly $0.32 per share on $313 million in non-GAAP sales.

Keep those figures in mind when Tibco outlines its official forecast. And when they do, you should compare the analyst figures to Tibco's non-GAAP guidance. Yes, there's such a thing as non-GAAP revenue at Tibco these days.

Tibco bought data analytics specialist Jaspersoft in April for $185 million. This acquisition came with a significant amount of revenue tied to subscription contracts, which is not included in GAAP revenue totals. Moreover, Tibco is moving some of its own software into a subscription sales model. So we might as well get used to looking at non-GAAP sales, because the difference between traditional and adjusted revenues will only grow over time.

"Currently recurring software revenue comprises about 9% of Tibco's total software revenue," explained recently appointed CFO Jim Johnson. "Our goal is to significantly increase our mix of recurring software revenue going forward."

In the second quarter, non-GAAP sales were just $1.7 million higher than the GAAP revenue figure. Tibco didn't provide a firm subscription sales target for the third quarter, but did say that it should become 20% of all software revenues in 2015.


Anders Bylund owns shares of Tibco Software. The Motley Fool recommends Qlik Technologies, Splunk, and Tibco Software. The Motley Fool owns shares of International Business Machines and Oracle. Try any of our Foolish newsletter services free for 30 days.

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