Nice Ltd (NICE) 2009 Q2 法說會逐字稿

Welcome to the NICE Systems second quarter 2009 results conference call and thank you all for holding. (Operator Instructions.) I would now like to turn this call over to Ms. Daphna Golden, Corporate Vice President, Investor Relations and Corporate Development at NICE. Please, go ahead.

Thank you, operator, and good day, everyone. With me on the call are Haim Shani, Chief Executive Officer, and Dafna Gruber, Corporate Vice President and Chief Financial Officer.

Before we start, I would like to point out that some of the statements made in this call will constitute forward-looking statements. In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, please be advised that the Company's actual results could differ materially from these forward-looking statements. Additional information regarding the factors that could cause actual results or performance of the Company to differ materially is contained under the subheading "Forward Looking Statements" in the Company's 2008 annual report on Form 20-F as filed with the Securities and Exchange Commission on April 6, 2009.

Such factors and forward-looking statements are based on the current expectations of the management of NICE Systems Limited only and are subject to a number of risks and uncertainties that could cause the actual results or performance of the Company to differ materially from these described herein, including but not limited to the impact of the global economic environment on the Company's customer base, particularly financial services firms and the resulting uncertainties; changes in technology and market requirements; decline in demand for the Company's products; inability to timely develop and introduce new technologies, products and applications; difficulties or delays in absorbing and integrating acquired operations, products, technologies and personnel; loss of market share; pressure on pricing resulting from competition; and inability to maintain certain marketing and distribution agreements. The Company undertakes no obligation to update or revise these forward-looking statements, except as required by law.

During today's call, Haim Shani and Dafna Gruber will present a more detailed discussion of the second quarter 2009 results and the current outlook for NICE. Following our comments there will be an opportunity for questions. Let me remind you that unless otherwise noted on this call, we will be commenting on our adjusted results of operations which differ in certain respects from Generally Accepted Accounting Principles, as reflected mainly in accounting and acquisition-related revenues and expenses, amortization of intangible assets, and accounting for stock-based compensation. The differences between the GAAP adjusted--the GAAP and non-GAAP adjusted results are detailed in today's press release.

With that, I will turn the call over to Haim Shani.

Thank you, Dafna. Hello, everyone, and thank you for joining us today to discuss our performance during the second quarter. In Q2, revenues reached $140.5 million and earnings per share reached $0.36. Overall, as we anticipated in early May, I would characterize the second quarter market environment as stabilized with improvements in certain areas of NICE business.

Let me give you some color on our performance in markets during the quarter for (inaudible). First, by agent. As we indicated in our Q1 announcement, the second quarter for the Americas, the region that represents more than half of our business, continued to demonstrate improvement across the board for most of our product lines. Our business performance in APAC was slightly better during the quarter and we see this trend in most of the region's countries, both on the enterprise and security fronts. The EMEA region, however, does continue to be challenging with much of the business in a holding pattern.

Now, let's take a look at the enterprise sector overall. The growth drivers for our enterprise business are very relevant in today's environment. NICE continues to deliver the solutions that help organizations maintain their competitive edge in any business environment. For example, as many organizations face (inaudible) scrutiny from regulators worldwide, NICE is well positioned to help them improve their compliance capabilities. Furthermore, in these challenging financial times, as organizations focus on improving operational efficiencies while lowering the total cost of ownership, NICE is well positioned to provide them the right solutions. And as organizations look for ways to enhance customer retention and [insight] in increasingly competitive markets, NICE solutions are extremely relevant as well.

NICE interaction analytics helps our customers achieve strategic goals, such as improving [fiscal resolution], operational efficiency, customer retention, and collections efficiency. And as a result of this real world value, our interaction analytics has achieved a substantial improvement in the second quarter, both in terms of the pipeline and in actual buying patterns. An example of the real value we bring comes from the First International Bank of Israel, which was recently announced. The Bank implemented NICE's interaction analytics business solutions to take their technology capabilities beyond support for regulatory compliance and to turn the conference center into a revenue generator, which is a key value add that they can now bring to their organization.

The market leadership of our analytics was recently recognized by leading industry analyst firm, Datamonitor, in its 2009 contact center analytics market report. In this report, NICE was noted for its unique offering of solutions that address the critical needs of the contact center in enterprise. The report also noted the value of our offering--the value of offering our interaction analytics as a hosted service in addition to our on-premise version.

To support our growth in the mid and long-term, we plan to strengthen our market presence and to support an enhanced go to market strategy. Furthermore, the recent launch of NICE Perform eXpress utilizes and strengthens our distribution opportunities with NICE channel partners. NICE Perform eXpress is a new product that delivers cost efficient enterprise grade compliance [reporting] to SMBs and to small corporate centers, branches, and back offices. It opens the door to opportunities for channel partners, enabling them to sell our customers and prospects capabilities previously unattainable at an attractive price point.

Moving on to the Actimize side of the enterprise business, it continues to do well and has demonstrated growth in revenue over the first quarter. The quantifiable (inaudible) for our Actimize solution is nothing less than remarkable. Take as an example the benefits gained by a top five U.S. bank as announced last week. This bank implemented the Actimize fraud prevention solution and within only six weeks of its seven-digit investment the bank realized a 100% ROI by detecting wire fraud attempts in real time.

Now, let's take a look at our Q2 performance in the security sector. Our global security business is diversified across a variety of verticals, including first responders, transportation, government, and private entities. We continue to benefit from the ongoing trend of governments around the world taking measures and investing in technology to combat crime and terror threats. We saw in the second quarter that the market for our security solution is stable and continues to provide us with the upside potential.

In the U.S., our business was up with transportation and local and state government customers. The FAA frame agreement continues to be a successful project. As of the end of the second quarter, we received orders from the FAA for a total of approximately 275 NICE Inform systems, which are being used to record communication between pilots and air traffic control. The total frame agreement announced in May 2007 will cover approximately 850 sites throughout the U.S. for a total period of up to seven years.

In EMEA, the economic situation has impacted us to some degree, primarily our ongoing business activities in the private sector and with certain national and local government prospects. In APAC, the NICE security business is growing and there is a strong potential for continuous growth in this region. As for emerging markets, looking ahead at the second half of 2009, we continue to work on a fairly large number of security projects that are in the pipeline. These projects range typically between $5 to $15 million. These projects include a major government facility, as well as complex national security operations.

To summarize, although for the most part we're experiencing stabilization in our markets, the global economic environment still remains uncertain. The 2009 first half results reflect the strength of our business, the relevance of our growth drivers, and has demonstrated our ability to continue to deliver despite a volatile economy. Looking ahead, we believe that the increase in activities in the U.S. and APAC, a strong pipeline in the security business, and hopefully ongoing stabilization in the EMEA region, combined with the launch of the new products for the enterprise market, will result in growth for NICE in the second half of 2009.

As you all know, we announced yesterday that I will be stepping down in order to start a [formal] (inaudible) process to the position of General Manager of the Ministry of Finance of the State of Israel. As you can imagine, after 27 years in the high tech industry, this was not an easy decision for me. However, I felt this was an honor and an opportunity to contribute from my experience to the country's economy and I accepted the offer. I am leaving NICE in the very capable hands of an executive who will bring to NICE experience in innovation, global management, mergers and acquisitions, and the right mix between business aggressiveness and the human touch. I am confident that the excellent management team of NICE, its great people, technology, customer base, partners, and strong balance sheet, will assure that, together with Zeev Bregman, the Company will continue to enjoy much success in the future.

During the next few months, I will continue to lead the Company while assuring a very smooth transition to Zeev at the end of the period. I know that many of you have expressed an interest in meeting Zeev, so I would therefore like to take this opportunity with all of you on the line to let you know that both of us will be attending the IR conferences in New York and Boston in mid-August.

I will now turn the call over to Dafna Gruber, our CFO. Dafna, please?

Thank you, Haim. I would now like to provide you with the analysis of our financial results and business performance for the second quarter of 2009 and add some additional color on what we are seeing as we enter the second half of the year. Revenue for the second quarter was $140.5 million, a 1% sequential increase from 139 million in the third quarter of 2009, and down 10% from 155 million in the second quarter of 2008. Net income in the second quarter reached 22 million, up 3% sequentially. This compares to 24 million in Q2 of last year. These results reflect our continued focus on profitability and the (inaudible) operating margin.

Year-over-year the revenues of 280 million recorded in the first half of 2009 were 7% lower than the 302 million in the first half of 2008. Net income for the first half was 43 million, or 5% lower than 46 million in the first half of 2008. Earnings per fully diluted share for the second quarter was $0.36, up from $0.35 in the first quarter, and compared to $0.39 in the second quarter of last year. Our bookings in the second quarter were higher than those achieved in the first quarter with book to bill equal to one. Our backlog continues to be strong and equals approximately two quarters of revenue. Enterprise revenues reached 105 million in the second quarter, up sequentially from 103 million in the first quarter and 160 million in the second quarter of 2008.

Our application business, including Actimize and interaction analytics solution, continue to show growth. Security sector revenues in the quarter reached 35 million, compared to 36 million in the first quarter and 39 million in the second quarter of 2008. We expect (inaudible) projects won in the second half of 2008 and 2009 to start contributing to our security revenue starting the second half of this year.

(Inaudible) by geography (inaudible). The Americas, our largest region, continues to show strength with second quarter revenues increasing to 89 million from 83 million in the second quarter of last year, accounting for 63% of revenue. Europe, Middle East, and Africa accounted for 37 million, or 26% of revenue, compared to 49 million last year, or 32% of total revenue, and compared to 34 million in Q1. APAC accounted for 50 million, or 11% of total revenue, compared to 24 million last year and 6 million--16 million in the third quarter.

Revenue from services increased to 75 million from 66 million year-over-year, dominated both by professional services and growing the [recurring] [portion] of maintenance. Revenues from maintenance accounted for more than 30% of total revenue. In the current environment, we successfully managed to provide value added services to our customers, contributing to a significant increase in our professional services business. We believe that when economy--the economy starts to stabilize some of our customers' budgets will convert back to more of product sales.

Q2 gross margin was 62.9%, compared to 63.2% in Q1 and 65.5% in the same period of 2008. The change in margin from last quarter was due to the mixture of products sold being partially offset by the higher percentage of the recurring revenue. We continue to target at least 65% as our current gross margin growth. The cost cuts we've implemented in the second quarter, coupled with our ongoing disciplined cost control measures, enable us to further reduce our operating expenses in the second quarter to 64 million, or 45% of revenue, which is down from 65 million in the prior quarter and significantly down from 76 million or 49% of revenue in the second quarter of 2008. This represents operating expenses at 16% lower than the second quarter of 2008. We continue to reallocate resources and invest in (inaudible) marketing with the goal of strengthening our (inaudible).

In Q2, operating margin increased to 17.6%, up from 16.5% in the second quarter of 2008. [Finance] income reached 1.8 million and we continue to focus on cash generation. In Q2 we generated 29 million, bringing the total cash and equivalents to a record of 559 million with no debts.

Looking ahead, this obvious improvement in the business leads us to currently anticipate growth in the second half of 2009, compared to the third half of the year, both in revenues and--both in top line and bottom line, with gradual improvement throughout the year. As we continue to benefit from the leverage in our operating model, revenue growth should translate into stronger growth in profitability and all of the above is obviously dependent on macroeconomic trends.

That concludes my comments. I would now like to turn the call over to questions. Operator?

Thank you. (Operator Instructions.) The first question is from Shaul Eyal of Oppenheimer. Please go ahead.

Thank you, and good afternoon, Haim, Daphna, and Dafna. Two quick questions on my end. For me, this is what most people have in mind - the second half growth over the first half growth, if you guys provide us with more color. I recall that last quarter at least you indicated that the second quarter should be sequentially flat or should resemble the first quarter. What kind of--what type of description would you be giving for the third quarter when we break the second half into the third and the fourth quarter?

Hi, Shaul. This is Haim. What we feel today would be the right analysis of our business is again to compare the second half with the third half. And if I would shed more color, if you would like, we should see greater improvement quarter after quarter. And we estimate that the total improvement on the second half versus the third half could range from a low single digit to a very high single digit. This would be the possible range. Obviously, we don't have a 100% accurate model that would give an exact number. But this could give you some analysis of how we think of the second half.

Okay, got it. That's fair enough. Dafna, any foreign exchange impact this quarter?

Really minimal foreign exchange impact, mainly on our operations in Europe. We had some additional costs as a result of the strengthening of the British pound. But no, not major.

Got it. And as we move already almost a month out of the quarter, again, going back to the EMEA point, any improvement over the last 30 days or essentially what you have seen in the final few days of the June quarter.

We don't mention our business on a monthly basis because it is a little bit premature. We hope that things are stabilizing, but again, we all read the same newspapers about the GNP of some of the large economies there. With respect to our business, as I said, we are basing our estimation at this point of time on the stabilization in EMEA and continuous growth in both APAC and the Americas. This is how--this is the base behind our growth prospects. And so far to date, the day that we give this estimate, it has not changed since in the last 30 days in any direction.

Got it. That's fair enough. Okay, thank you very much. I may come back for more later on. And Haim, congratulations and all the best in the future.

Thank you, Shaul.

The next question is from Daniel Ives of Friedman Billings Ramsey. Please go ahead.

Yes, thanks. Can you just talk about cost control over the next few quarters in terms of OpEx? I mean, should we be looking at flattish OpEx with a slight gradual up tick? Just talk about OpEx. That's my first question.

Well, we should see some increase in OpEx, but that should be in correlation to the increasing the--hopefully increasing the top line, while the increase in--the rate of increase in expenses should be lower than the rate of increase in the top line. So we should be able to generate some more leverage from--in the model.

Okay. And then, the second question is on the security jump second half over first half, and I presume that would be a stronger growth in the overall top line given the proportion.

It's a possible scenario.

Okay. And then, just comment--if you would just comment on the buyback just given the building cash balance.

Right now, we are 100% committed and working diligently in executing on a very attractive M&A strategy. Obviously, with M&A one cannot assure 100% success. Maybe we will be cautious for obvious reasons with everything that is going around us for the last few months. But I would say the combination of some stabilization in the business and the macro environment together with the build up, as you mentioned, of our cash, I think should lead us to take more risk and to be more aggressive with our M&A strategy.

Okay, thanks.

The next question is from Paul Coster of JP Morgan. Please go ahead.

Yes, thank you. Haim, you mentioned that new products would be a catalyst for growth in the second half. What are the new products that you have in mind? Are they both security and enterprise products?

Well, first of all, the primary growth that we would see is not necessarily from completely new products, but we--some growth should be attributed also to new products. The main focus in this respect is the NICE Perform eXpress, which is a product focusing on smaller contact centers, branch offices, back offices. And we intend to leverage the same product portfolio, the same product platform, as we have done in the past, both for the enterprise and for the security market. The initial launch is primarily for the enterprise market. There will be some customers in the security that could use it as it is on day one. And in the near to mid-term future this product will also be enhanced to answer the needs of the security markets. So this is one area.

In addition to that in the model (inaudible) we continue to add capabilities to our enterprise solutions, both packaged offerings and the technology that can help our customers in these major mega plants or data center consolidations. We think that NICE is the clear leader in today's environment where companies are trying to reduce total cost of ownership with the I would say evolving voice-over-IP and seek technology. And there are additional features capabilities that make our solutions very attractive in this aspect, and we are seeing a major plan in every customer that we talk to about this new capability that we keep on enhancing and introducing to the market.

The NICE Perform eXpress. Does this mark an effort to address the middle market, a new customer base, or is it the existing customer base?

It's a combination of new market (inaudible) and new opportunities within our large installed base that have smaller branch offices, back offices, and so on. So it's a combination of both.

Okay, and that brings me to another question definitely. The size of your enterprise deals, how is that changing? Is it getting bigger, smaller?

Not very different from the size we've seen before.

You mentioned that--.

--Obviously, the mix as you have noticed, book to bill, which was back to one this quarter, reflects I would say--and definitely when we look at the pipeline there are now I would say a more traditional level of the seven digit figure deals than we have seen at least in the first few months of the [year].

Book to bill was one-to-one in both segments, so approximately the same. And looking out through the back half of the year, do you think the growth rates will be similar across segments or is security going to be the stronger segment?

We are not--we usually don't comment on book to bill or growth. I think that over time the--both businesses should continue to grow and I don't see one specifically different from the other. There is definitely an upside on the security side coming from (inaudible) that are already in the (inaudible) that can be translated into revenues over the course of time. And also, upsides that may come from certain deals, very large deals that are in the pipeline we are currently working on.

Okay. I'm sorry about all of these questions. Just one last one. Haim, you said that Europe is stabilizing or in a holding pattern. What exactly is the issue there? Is it that your customers don't have budgets, that they--that you're seeing competition? What's the cause of the slowdown in that region specifically?

We've seen the economies in some of the countries--I would say we all read the same newspapers. Take the U.K. economy, and obviously it influences some of our customers in this part. This is also a region that we work indirect. So the portion of services business which is more for (inaudible) and stabilizing as a baseline is higher in the U.S. market versus the European market (inaudible) made some changes over the last few years, but still I would say a significantly higher percentage of our business in Europe depends on the actual business generated in the same quarter. So the combination of these two trends resulted in a more challenging environment in Europe. We hope it is stabilizing. Time will tell.

Thank you. Very helpful.

Thank you.

The next question is from Daniel Meron of RBC Capital Markets. Please go ahead.

Thank you. First of all, Haim, congrats on the move to the [mainstream] finance. Good--all the luck there. And then, obviously, to Zeev who will be joining NICE's ranks. Now, my questions are on where do you see the improvement on the vertical perspective or maybe asked differently, what is driving the sales process in this tough economy versus prior times? Are there any specific themes that come up or is it just around lowering the total cost of ownership?

It's the combination of I would say practically the themes that we have talked about probably for the last two quarters with respect to the [regulator] environment, the Actimize type of technology is very innovative. It's still in I would say most banks and financial services it's still in infancy in terms of its penetration, especially on the enterprise wide implementation on an enterprise wide basis. The overall need is there and it simply can do the job better than any other alternatives. So--and the pressures are there, whether it's the risk of fraud in tougher economic situations I would say make the risk of fraud higher. So this is in one environment. On the other part of the enterprise business, total cost of ownership is a major, major line item. And if we can save on different aspects, whether it's people, whether it's space, whether it's electricity, a combination of other I would say non-related NICE technologies that are associated with our product that we can save on, this makes a big impact.

And the other side of the coin is how to generate more business. The example of FIBI, or First International Bank of Israel, is an excellent example. We've seen how a relatively small contact center compares to let's say the global contact centers. It's using this technology in an excellent way to simply generate more business and with excellent ROI. They have opportunities for (inaudible) and packages, mortgages, and we have seen how our technology helps them make sense out of data that in the past no one could measure and take action items from. And that's the type of things that we are seeing with many customers.

Okay. And any specific verticals or product lines within NICE right now? I've been hearing that (inaudible) risk management is doing really well for you guys and that in security there's--you guys are still looking for pretty solid growth. So if you can delve a little bit deeper and give us some more granularity either on the vertical side or on the product side.

So Daniel, maybe you know more than us. It looks like you have some good sources. I mean, obviously, we don't break it directly by product. But I would say (inaudible) risk management falls under the category of operations efficiency and with 70% of the cost of contact centers associated with people, if we can help them do more with less or do more with the same, this obviously (inaudible) management in other technologies, including our analytics fall under this category.

Within the security market, I would say we are seeing opportunities across the board. I gave the example of the FAA and other verticals like the transportation in the public sector, and that we're doing reasonably well in most geographies. As I mentioned in EMEA there are areas that the challenges there are across the board, not related to a specific product.

Okay, and then last one for me. I think Haim you mentioned, or Dafna mentioned, that the growth rate that you see for the back half is going to range anywhere from low single digit to high single digit over the first half. What will sway the pendulum from one end to the other? Are there any specific events, milestone, or are we looking basically for the macro to drive this? Can you give a little bit more [clarity] on that?

I think that the range as you all know we have announced a very successful generation of both backlog and pipeline in our security project. To remind you, some of them exceed the eight-digit number. And as we are now entering the phase of implementation and delivery of these projects, which by the way have already started, in a very, very small scale in terms of the contribution to our revenue so far, the scale is relative. But it can be (inaudible) on a fairly large number. So the impact of just an example a $5 or $6 million dollar recognition within a quarter of a year or the first half or the second half, sorry, the impact can be significant. So we are making some assumptions, but this can have an impact on the range.

Okay, very good. Good luck going forward. Oh, I'm sorry.

I mean, it's obvious that the macro economy--I mean, if you look at the overall expectations for the macro economy, it is fairly positive for the second half. But we have been in some (inaudible) tough economies in the past.

Okay.

I'm (inaudible) to my new position.

Well, maybe you can help things along in the Ministry of Finance going forward. Thank you, Haim. Good luck.

Thank you.

The next question is from Shyam Patil of Raymond James and Associates. Please go ahead.

Hi, good morning. On the security revenue, when you look at the backlog you've built, obviously you've signed very significant deals to build a pretty strong backlog. How is it performed in terms of going from backlog to revenue relative to your expectations?

It's--as you can see, although we have not given an exact guideline for the quarter - I'm talking about the second quarter, we were able to meet what we thought we would meet, which is substantially the same revenue. Everything was factored in, including our expectations for security and enterprise. You can never be exact on the dollar, of course, although both businesses performed according to what we thought it was going to be on the first half and the second quarter. And so, primarily for the quarter, compared to the first quarter.

Okay, got it. And when you look at the second half of the year, it seems like the security revenue has been a little bit lumpy, especially when you think about how one might have expected it to come from the backlog. When you forecast it for the second half of the year, how do you think about just the puts and takes in building your forecast, specifically for security?

Frankly speaking, it's a little bit more challenging, because on the enterprise side, we're talking about a very large number of bids with a price point that can range from 100 to even less thousands of dollars to seven-digit marks. And you have a very large quantity, so your probability of making an exact number is higher. On the security front, we have the security business split into two. Part of it is I would say what we call the traditional legacy NICE business where we are providing for security organizations the combination of audio, video, a lot of them in fairly small deals with large quantities. But we have a growing percentage, significantly growing percentage of revenue coming from large projects. So there it is--we are taking probabilities, but the end game can be fairly (inaudible). As I mentioned before, if you have a $5 or $6 million project that you can recognize in a given quarter, it can turn out to be either six or zero and not something in the middle.

So here we have a little bit more I would say complex (inaudible). For the second quarter, as you can see, we were able to meet what we expected and this is also the reason behind us giving a half a year--second half of year guidance where we feel the probability that we can guide within the second half, which is a longer period, is higher. So I hope I gave you some color.

Yes, that was helpful. Switching to Actimize for a second, can you just update us on how the cross selling of Actimize into your install base is progressing and if there's any way to quantify that as well?

We cannot quantify it, but I would say we are taking more and more steps, most to compensate the legacy NICE distribution where applicable in generating more business for Actimize. And we are seeing progress there. We have also--part of the spend or the increase in expenses in research and development as we have announced in the first quarter was tailored in order to build I would say a much more integrated offering where it's relevant. And to quantify, it's not relevant everywhere, but there are some areas that we have identified. And we are also making some progress in making I would say some dedicated sales that would focus on the joint offering. So in all these areas we are making some progress. It's not something I can or even would like to quantify. There are several opportunities on the pipeline at this point to be generated as a result of this joint activity.

Got it. And just my last question then. It seems like several--or I wouldn't say several--maybe a handful of vendors that are selling to the call center market seem to be announcing large deals and seem to be indicating that spending might be opening up. How would you characterize the call center spending environment? Would you characterize it as opening up or would you be a little bit more tempered in your tone there?

I would say that the second quarter compared to the first quarter in the enterprise sector, which is primarily focused on the contact center, not only, but obviously, the contact center is a major chunk, we have seen both in the Americas and APAC a definite increase on the actual booking in the second quarter, compared to the first quarter. So this is probably what other vendors are seeing. And if we look at the pipeline we are cautiously optimistic, if you like, that this trend will continue in both the third and the fourth quarter in the contact center space. So I can understand why other vendors are talking or seeing the same.

Thank you, Haim, and congrats on your new position and best of look.

Thank you, Shyam.

The next question is from Tom Ernst of Deutsche Bank. Please go ahead.

Yes, good morning, Haim. One question for you on--the service revenue performance was quite strong in the quarter surprisingly. I think a lot of other companies are finding education and training revenue is hitting some headwinds and customers even pulling back on implementation. What have you been able to do tactically to generate the demand for NICE services?

Yes. It was much more than just a traditional training and education. It is much more, if you like, of a value added around our technology, so whether it's a customization, whether it's a specific model or fine-tuning that we have built for our customers in order to make better use of our technology in a different space.

Right. Thank you, again.

Thank you.

The next question is from Brian Ruttenbur of Morgan Keegan. Please go ahead.

Yes, thank you very much. Mix of product and services revenue in the second half of the year - do you expect it to be similar to Q2, that mix?

Our model is now to have product revenues of 50-plus percent and the services below 50%. Going forward, I believe we will get there. I'm not sure it would happen specifically in Q3 or the second half of the year, but that's our target model.

Okay. And then, financial income dropped dramatically from Q2 to--from Q1 to Q2. Can you tell me why and what you anticipate going forward?

Yes. The main reason is obviously the decline in interest rate. We're still benefiting from investments made two, three years ago with much higher interest income. These (inaudible) bonds are being paid and the new investment we are making is at much lower interest rates. I think what's important to know is that our current target for interest income throughout this year will probably range between eight to 10 million.

So eight to 10 million would be your interest income on the year?

On the year, yes.

Okay. And then, your tax rate going forward. Should we use second quarter tax rate or what's going to be the mix in the second half of the year?

The tax rate target for us is to range between 18 to 20% (inaudible) some situations from quarter to quarter. But our target is between 18 to 20%.

Great. Thank you very much.

Thank you.

Thank you. There are no further questions at this time. Before I ask Mr. Shani to go ahead with his closing statement, I would like to remind participants that a replay of this call is scheduled to begin in two hours. In the U.S., please call 1-888-782-4291. In the U.K., please call 0-800-917-4256. In Israel, please call 03-9255-954. And internationally, please call 9723-9255-954.

Mr. Shani, would you like to make a closing statement?

Yes. I just want to thank you all for joining us and have a great day. Thank you and bye-bye.

Thank you. This concludes the NICE Systems Second Quarter 2009 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.