Nice Ltd (NICE) 2009 Q3 法說會逐字稿

Welcome to the NICE Systems third-quarter 2009 results conference call, and thank you all for holding. (Operator Instructions). As a reminder, this conference is being recorded November 2, 2009. I would now like to turn this call over to Ms. Daphna Golden, Corporate Vice President, Investor Relations and Corporate Development, at NICE. Ms. Golden, please go ahead.

Thank you, Operator, and good day, everyone. With me on the call are Zeevi Bregman, President and Chief Executive Officer, and Dafna Gruber, Corporate Vice President and Chief Financial Officer. Eran Liron, Corporate Vice President for Business Development, will join us for the Q&A session.

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 1996, 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 5, 2009.

Such factors and forward-looking statements are based on the current expectations of the management of NICE Systems Ltd. only, and are subject to a number of risks and uncertainties that could cause actual results or performance of the Company to differ materially from those described herein, including but not limited to the impact of the global economic environment and the Company's customer base, particularly financial services firms, and the resulting uncertainty; 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 arrangements.

The Company undertakes no obligation to update or revise these forward-looking statements except as required by law.

During today's call, we will present a more detailed discussion of the third-quarter 2009 developments 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 acquisition-related revenues and expenses, amortization of acquired intangible assets, reorganization expenses, share-based compensation expenses, settlement and related expenses, as well as certain business combination accounting entries. The differences between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today's press release.

With that, I will turn the call over to Zeevi Bregman.

Good day, everyone, and thank you for joining us today to discuss our third-quarter results.

With this being my first conference call as President and CEO of NICE, I would like to start by sharing with you how impressed with and proud I am to lead NICE. The transition period was effective and well orchestrated. During the past few months, I met with NICE employees, customers, and partners around the globe, witnessing the strength of the Company.

NICE is an exciting Company with enormous growth opportunities, a loyal and strong customer base, great technology and products, and an extremely skilled, professional, and dedicated group of employees led by a strong management team.

I would like to take the opportunity to thank Haim Shani on behalf of the entire NICE team for his contribution to the Company's success and wish him luck in his new role.

Now turning to the third-quarter results. We have been seeing early signs of recovery in our markets and improvement in our business. This is evident in our revenues, order intake, as well as our healthy pipeline.

Non-GAAP revenues reached $146 million, and non-GAAP earnings per share reached eighty -- $0.38, both record levels for 2009. Order intake improved during the quarter and resulted in a record backlog, the highest in the Company's history. The book-to-bill ratio was greater than one, both on a quarterly basis and for the first three quarters of the year.

On a regional level, the Americas continues with its relatively strong performance, and compared to the previous quarter of this year, our EMEA region showed, for the first time since the beginning of 2009, signs of improvement as well.

Looking at the enterprise sector, we at NICE help our customers address the increasing requirements for compliance and risk management, improved operational efficiency, and enhanced customer satisfaction. These are the core drivers for growth of our enterprise business in the immediate, mid-, and long term.

I would like now to highlight some of the main strategic wins in various parts of the enterprise business in order to demonstrate the different market dynamics. Several weeks ago, we announced a $4 million follow-on order for a major global bank.

This will emphasize several key takeaways. First, this major bank, which acquired another bank, decided to standardize on one platform, the NICE platform. Consolidations typically benefit market leaders and, indeed, NICE was selected as the vendor of choice.

Second, this bank has been experiencing an increase in call volumes, especially given the current economy -- the need for credit card and refinancing on one hand and with a need to deal with clients concerned with their investment portfolio on the other. Bottom line, there is a need to support more calls, which drives more business to NICE. This trend of increasing call volumes is also evident in other verticals, including the telco market.

Third, this bank has centralized its call center operations. This continued data center consolidation trend [is] enabled by migration to voice over IP, which results in lower total cost of ownership for our customer and drives new orders for upgraded NICE recording platforms.

All three trends -- standardization, expansion, and consolidation -- bode well for NICE. NICE is an [excellent] choice for large, complex, and sophisticated implementations that require robust and scalable solutions. Moreover, it lays a foundation for future efficient adoption of announced application based on advanced interaction analytics.

Last week, we announced a major win for the NICE SmartCenter workforce management solution. I am referring to the major U.S. telco that selected our SmartCenter workforce management solution, in a deal valued at over $5 million, to replace a homegrown solution. Our best-of-breed solution will enable the more efficient scheduling of 20,000 agents working in complex, multi-skilled, and multi-site environment in 100 contact centers.

We are [seen going to the mound] for management systems that support complex, multi-skilled, multi-site environments. Here, too, we believe our product capability and technology are unmatched.

Our NICE SmartCenter business solutions, based on interaction analytics, improves our customers' business performance. Recently, in a deal we have not announced yet, a U.S. wireless carrier selected NICE to address a pressing need to predict and reduce customer churn and more effectively deal with rising competition.

By bringing together transaction analytics with existing transactional predictive model, the telco is able to improve their QSC of churn model. Furthermore, interaction analytics identifies churn candidates much sooner than traditional models, allowing the carrier to target specific customers in a proactive manner, even before a churn decision is made. This is a clear example of how NICE SmartCenter solutions, based on interaction analytics, helps reduce customer churn and improve customer satisfaction as well as sales and marketing effectiveness.

The ACTIMIZE part of our [enterprise] business presented strong results in the third quarter. On August 31, NICE made the first major consolidation move in this segment with the acquisition of Fortent's compliance and risk management business. This acquisition created the industry's largest and broadest financial crime and risk solution provider.

Following the acquisition, all of the top 10 global banks and the majority of the worldwide largest banks are now using ACTIMIZE. We are well positioned to leverage the anticipated wave of global regulation for financial institutions, given the size and scope of our product portfolio and client base.

Earlier today, we announced a multimillion deal with one of the top 10 global banks. This bank selected to standardize on ACTIMIZE for fighting fraud across the enterprise. The bank decided to standardize on the ACTIMIZE anti-fraud platform, replacing numerous third-party and proprietary systems.

This is one of the industry firsts of what could be many moves toward a single enterprise-wide fraud risk management platform. The ACTIMIZE solution will help prevent fraud in real time across various channels, such as Internet, call centers, cards, payments, ATM, and more.

This win is an important milestone in positioning ACTIMIZE as the de facto standard in the growing compliance and risk management analytics industry.

We continue to gain industry endorsement with leading industry analyst firms such as Gartner. ACTIMIZE was the only company to receive the highest rating possible, strong positive, in Gartner's September 2009 enterprise fraud management MarketScope report. This high rating is given due to strong balance of forward-thinking technological development and competitive dominance in the market.

Now, let's take a look at our securities sector. The securities sector is a key growth driver for NICE and is driven by the ongoing and ever-growing need to make the world a safer place. We serve a variety of verticals, including emergency centers, critical facilities, transportation, government agencies, and private enterprises worldwide.

With our unique set of comprehensive solutions, we are revolutionizing the way safety and security are addressed. Our strategy is to build a unique solution and product that leverage the Company's core competence in corporate capturing, managing, and analyzing massive amounts of unstructured data, combined with a state-of-the-art proprietary security technology.

These solutions accelerate the success of both security and enterprise organizations and businesses. This strategy already generated major wins announced lately. A great leap ahead was the winning of our largest contract ever, a $55 million contract with a government agency. This agency will be implementing the NiceTrack technology, which enables advanced telecom interceptions of different types of communications, generating comprehensive intelligence.

This win serves as an important milestone in the evolution of our security business, taking it to the next level in terms of growth and contribution in the mid-term.

In parallel, NICE continues to expand its extensive portfolio of comprehensive and advanced security solutions. We have recently acquired Hexagon that we believe is the provider of the world's most cost-effective, similar-location tracking technology.

These grants are offering a unique competitive edge. Our security business enjoys a healthy backlog and strong pipeline, and remains a key driver for the Company's future growth.

To summarize, this quarter we showed improvement in our business performance with booking revenues and profitability reaching record levels for the year. We further enhanced our market position by investing in new technologies, as well as winning groundbreaking deals.

We strengthened our ACTIMIZE business, one of the key growth drivers, with the acquisition of Fortent. We continue to pursue mergers and acquisitions as a natural extension of the Company organic growth.

Looking ahead, we are cautiously optimistic that the current business trends will continue to show growth for NICE in the fourth quarter and in 2010. I will now turn the call over to Dafna Gruber, our CFO. Dafna?

Thank you, Zeevi. Hello, everyone. Revenues for the third quarter reached $146 million, a 4% sequential increase from $140.5 million in the second quarter of 2009. This compares to $163 million in the third quarter of 2008.

Net income in the third quarter reached $24 million, up 9% sequentially. This compares to $27 million in Q3 of last year. Earnings per fully diluted share for the third quarter were $0.38, up from $0.36 in the second quarter and compared to $0.43 in the third quarter of last year.

Looking at our bookings and backlog, the bookings recorded in the third quarter were higher than those achieved in Q2 and Q1 of last -- of this year. The book-to-bill ratio was greater than one and our backlog is now at an all-time high.

Enterprise revenues reached $109 million in the third quarter, up sequentially from $105 million in the second quarter. This compares to $118 million in the second quarter of 2008.

Our enterprise application business, including NICE SmartCenter business solutions for workforce management and interaction analytics, as well as ACTIMIZE, continued to show strength. Security sector revenues in the quarter were $37 million, up sequentially from $35 million, compared to exceptionally high $45 million in the third quarter of 2008.

The split by geography was as follows. Revenues in the Americas, our largest region, reached $91 million in the third quarter, up from $89 million in the second quarter and accounting for 63% of revenues. Year to date, revenues in the Americas increased to $270 million, up 7% from the $252 million last year.

Revenues in Europe, Middle East, and Africa accounted for $37 million, or 25% of total revenues, similar to Q2 of this year. This compared to $50 million last year. The EMEA region, which was most -- the most effective in the first half of the year, showed some signs of improvement in bookings in the third quarter.

APAC accounted for $18 million, or 12% of total revenues, compared to $25 million last year and up from $15 million in the second quarter.

Revenues from services reached $76 million, up from $75 million last quarter and in Q3 of 2008. Revenues from maintenance accounted for approximately one-third of total revenues and had a positive impact on service margins.

Q3 overall gross margin was 62.9%, similar to Q2 and compared to 64.8% in the same period of 2008. The Q3 gross margin for products was 73.7% and gross margin from services reached 53%. We continue to target 65% as our mid-term gross margin goal.

Operating expenses in the third quarter were $67 million, or 46% of revenues, coming in 11% lower than Q3 of last year and compared with $64 million in the prior quarter.

For your convenience, the breakdown of non-GAAP operating expenses in the third quarter was as follows. Research and development accounted for $17.8 million; sales and marketing accounted for $33.5 million; and G&A accounted for $15.6 million; again, all these figures are on non-GAAP basis.

The sequential increase in operating expenses consists mainly of operating costs of only one month of activity of the acquired businesses of Fortent and Hexagon. Both acquisitions were signed and closed at the beginning of September.

As previously discussed, the Fortent acquisition will be accretive and should have a positive impact on overall operating margins starting 2010. The increase in operating expenses was also partially impact by the costs associated with management transition.

Overall operating margins reached 17%, compared to 17.5% in the second quarter and 18.6% in the third quarter of 2008. We expect gradual improvement in operating margins going forward.

We continue to invest in maximizing the available tax benefits, and recently filed several tax returns with actual taxes due coming in less than previously [accrued]. We continue to focus the range of 18% to 20% as our effective tax rate target.

We continue to focus on cash generation. In Q3, we generated $28.3 million cash from operations, bringing the total cash generated from operations since the beginning of this year to $90 million. This is compared with $93 million generated in the first nine months of 2008.

It is a great achievement, especially when taking into consideration the market conditions. Our cash generation was not affected despite a certain decline in the business.

Our total cash and equivalents at the end of the quarter reached $518 million with no debt. This follows the approximately $85 million that were paid for the two acquisitions completed during the quarter.

Looking ahead, given the initial signs of improvement discussed earlier, we currently anticipate Q4 revenues to grow at a mid to high single-digit percent over the third quarter with slightly higher growth in profitability. This concludes my comments. I will now turn the call over to questions. Operator?

(Operator Instructions). Daniel Ives, FBR Capital Markets.

When you talked about those expenses associated with the acquisition, the one month, how should we think about that? Could you try to quantify that in the quarter? Was that a few million dollars?

Yes, I would expect an increase resulting from the acquisition of about -- between $2 million to $3 million additional expenses going forward on a full-quarter basis. I do believe that we'll show gradual improvement in operating margin, I assume this is what you are referring to, together with the increased -- sequential increase in revenues.

Should we view last quarter's operating margin as more of a good runrate, given this quarter you had the one month of extra expenses on the acquisition?

I believe that for modeling purposes, you should assume gradual growth of about $2 million in operating profit in Q4 compared to Q3. But as I've mentioned, our target for operating margin is to have an improvement in operating margin in Q4 compared to Q3.

Okay. And then, how should we think about all the big security deals that are coming through the model in terms of bookings? When should we start to see those really hit the model? Is it really like a mid-2010? How should we think about the timing of those, like the $55 million deal? Thanks.

First, as you may see on a sequential basis, our security business grow from the second quarter to the third quarter, and we anticipate that this growth will continue in the future.

When we are looking at the -- when we announced the $55 million securities deals, we said, and we are still on plan, that the revenues will be taken over a period of two to three years, and we are still with this plan. So, the revenues of the -- it will take us two to three years to use the revenues of this deal. About one-third of this revenue will be in 2010.

Shaul Eyal, Oppenheimer & Co..

Zeevi, congrats again. Your first kind of official conference call as the CEO. A couple of quick questions of mine. Zeevi, a few months into the CEO role, what's the current thinking what's to improve? Any specific areas or maybe the common theme is if it ain't broken, don't fix it.

I think it's more than the if it ain't broken, don't fix it. And I'm also -- from the external and also from the internal, NICE is a very impressing Company and was very well-managed. And -- I think they had many changes in plans that are in progress when I joined. And I didn't see any reason to change the course.

I think that things in the state of the Company, which is a very good state, should be by evolution and not by revolution. And -- we are -- I'm accelerating some of the existing programs and using other programs, but it's more evolutionary than revolutionary.

Got it. Fair enough. Thanks for the fourth-quarter guidance. Any initial thinking about 2010 at this point? Kind of hinting of that in the press release. Maybe we can get some more color in that end?

Yes, the way we think about it internally is that 2010 is definitely -- should definitely be a year of growth. This is what we are planning for.

The way to address it at this point is with a bit of cautionary statement because and only because of macroeconomic trends that may have an impact. But overall, internally, we are definitely planning for growth.

Got it. And is it fair to assume that when we look at it from a non-organic standpoint, taking Fortent, for example, into the equation, we could be talking about you guys getting back to double-digit growth rates as was the case in prior years?

I think that double-digit growth is the long-term target for the Company. So, it's -- that's the way to look at it.

Shyam Patil, Raymond James & Associates.

This is B.J. Corey, filling in for Shyam. Thank you for taking my call. I just had a couple of quick questions. My first question is regarding 4Q expectations. What are you hearing about -- from customers in terms of a potential budget flush?

We didn't -- I mean, we have a very healthy pipeline entering the quarter. This is not -- there is a seasonality in the business, but the fourth quarters tend to be a strong one, but we need to execute and bring the pipeline -- [pass] on the pipeline into orders.

All right. And just a quick follow-on question. In terms from a competitive landscape perspective, what are you seeing in the enterprise and security space going forward?

First, on the enterprise side we believe we improved our market positioning in the third quarter and from the beginning of the year. We are seeing our usual competitors.

When we are looking at the ACTIMIZE, for example, we just announced a mega-deal this morning. And this is another evidence for strengthening our market position. And there are no major changes in the competitive landscape during this quarter.

On the security side, we have different areas and different competitors, and it's very difficult to name all of them. And again, we believe that we are gaining market share. Our market share, in some of the segments there, is lower than in other markets that we are operating, like video. We are seeing good traction, and it's difficult to say whether we are gaining or losing market share because the markets are very large, but the pipeline still looks promising.

Brian Ruttenbur, Morgan Keegan & Co., Inc..

Thank you very much. First question I have is about 2010 growth. You say your long-term goal is double-digit growth. Can you talk a little bit about maybe in 2010 what you expect the enterprise to grow versus security? I think that I'm backing up to a question that was already asked. But is security going to grow faster? Is it going to be double-digit, like 15%, versus enterprise more like 6% or 7%? Can you give us some kind of idea on that?

Yes. As I mentioned earlier, we believe that at this point, we should give very -- wide or very generous statement on 2010, simply because of macroeconomics.

Overall in different periods, as mentioned, the enterprise and security businesses in our model should grow at low to mid -- double digits. In the past, we've said that security has the potential to grow even faster than that. But that would -- regarding 2010, it is yet to be seen.

So can I then assume that security is going to grow faster than enterprise, or is that a bad assumption? (Multiple speakers).

No, it is not a bad assumption. Obviously, on the security side we have a larger pipeline -- a larger backlog, sorry. And therefore our confidence level is higher on the security side than on the enterprise.

However, in both segments we are seeing the potential of growth in 2010.

Okay. And then on your operating costs, you talk about fourth quarter versus third quarter, your operating costs are going to be up $2 million to $3 million. Can you -- is it going to be broken down $1 million apiece between sales and marketing, G&A, R&D? Or is it -- how should we be looking at that and modeling the breakdown of the costs?

I believe the majority would be on R&D and sales and marketing.

And then, gross margin, we should see an increase in gross margin or a stability in gross margin from third quarter to fourth quarter?

With more volume, I believe that the gross margin should improve.

And then, final question, on a non-GAAP basis, we should see higher non-GAAP earnings in the fourth quarter versus the third quarter, is that correct?

That's a good assumption.

Daniel Meron, RBC Capital Markets.

Hi, Zeevi and Dafna. Congrats on the ongoing execution here and, again, congrats on assuming officially the CEO position and the first conference call.

So my first question is just to clarify, when you were talking about the fourth quarter growth, you were talking about mid-single digits to high single digits kind of growth, sequentially. Does this include the Fortent contribution and how much of Fortent's revenue did you recognize in this quarter?

It includes obviously everything, including Fortent. We had contribution of Fortent of about $2 million this month. Or in the month of September. Sorry.

$2 million, so is the run rate (multiple speakers) --?

(Multiple speakers) $2 million. It's not a clear indication of the runrate. You know September is the end of the quarter, but we should expect several million coming from Fortent business.

We need to remember that Fortent is a very integrated or complementary business to ACTIMIZE, so very soon -- we already started looking at this business as a combined business.

Got you. And then, now looking at the prior years, the degree of sequential growth, if I was to back out Fortent, was higher. It was somewhere around high single digits typically, partially because seasonality and budget flush and just -- . So I was wondering if your assumptions here just assume a very mild economic climate that will lower the typical year-end seasonality that we've seen in prior years. Is that safe to say

Probably, yes.

Okay. Now as we look into next year, and within security, is there a segment or certain markets that you think you will see more of a growth? Say, first response versus video versus homeland security in general? If you can just specify on that segment.

And then within enterprise, where do you think that we should expect most of the growth? Is it ACTIMIZE, workforce management?

Okay, so first, on the enterprise side, the major growth engine that we have are ACTIMIZE and the SmartCenter interaction analytics and workforce management. These are the growth engines and this is where we are expecting growth.

In terms of the security side, we are seeing more -- we are seeing growth on the critical facility and we are seeing a healthy pipeline in the critical facility and transportation segment, as well as with NiceTrack and with some safe city-like projects that we are providing.

Very good. This is helpful. Thank you, Zeevi, and good luck going forward.

Jonathan Ho, William Blair & Company.

Congratulations on your first quarter. Can you talk a little bit about some of the improvements that you are seeing in the EMEA region and -- just the outlook, maybe, by region in terms of improvements and stabilization?

When we spoke about the improvement in EMEA, we spoke about the booking and bookings were larger this quarter than in the previous quarter.

We are seeing also a larger pipeline that we used to have and therefore we are optimistic in terms of the business strength. It's difficult to characterize it by per segment or per -- because, at the end, it's several deals and it's not -- it's difficult to get to a subcategory view.

I'm not sure that I remember the second part of your question, so if you can repeat it.

Just in terms of the APAC region, just sort of what are the trends there, looking forward?

APAC region had a slow quarter this quarter. We believe and we hope, actually, that this is a one-time event and we are looking for recovery in the next quarter. Based on pipeline and other indications, we should be back and -- we should be stabilized during this quarter.

In terms of maybe looking at it from enterprise versus mid-market, is there any difference in maybe the tone between customers, and how should we sort of think about growth between those segments going forward?

Between enterprise and mid-market?

Yes, just in terms of the size of your customers, if they are different?

We are defining it differently. We are -- our main advantage is the -- when we are dealing in terms of market share and wins and where we are [digging] in complex and high-scale customers and sophisticated customers because of the strength of our application, and this is the area where we are excelling. So, the large-scale customers are more than what you call enterprise. The area that we are seeing more business, and this was also going to take place in 2010.

Roni Biron, UBS.

Two questions for me. First, looking at the sequential increase in Q3 and your expectation for Q4, how much of that is related to seasonality versus an actual pick-up in spending?

I must say that being less than two months at the position, it's very difficult for me to say whether this is seasonality or this is because of improvement in the business. What we see is that we have a stronger pipeline.

I see. And regarding the revenue mix, it appears that product gross margins are trending down while service margins are trending up for three, four quarters now. Regarding products, could you explain if the lower gross margin is related to pricing or lower software components, and how far can you go with service margins?

On the product side, it's always a combination between several elements, the mixture between hardware and software mainly on the enterprise side and sometimes lower margin on the security project. So it's maybe a mixture.

I believe improvement should come there as we show improvement in total revenues. So, additional several millions in revenues should contribute to improvement in the gross margin on products.

On the service side, I believe that we reached a certain high margin on the service and I don't see there is a very big potential for upside on that front.

And just so -- to make sure I understood correctly, the higher operating expenses during the quarter are related to the acquisitions, one month of acquisitions, or was it slightly dilutive for the quarter?

The acquisition, and mainly the Fortent acquisition, which is the larger one -- or the more -- the one that impacted more. As we said when we announced this acquisition, we said that this deal is slightly dilutive in the first few months and will become accretive in 2010.

So what you're seeing now was a slight impact of this acquisition. But going forward in 2010, this specific -- the contribution here would be accretive.

When we are saying 2010, we are meaning the first quarter of 2010 it could become accretive.

Yes. Yes.

Paul Coster, JPMorgan.

Thank you. Good morning. First of all, Dafna, was there any currency effect that we should know of in the results and moving forward? You continue to hedge the next quarter out, is that correct?

Yes, we keep the same policy. Very little impact on the -- off exchange rate this quarter, and currently I don't expect -- anticipate a major one in Q4 as well.

Earlier on in the prepared remarks, you talked of how core volume is driving growth and multi-site implementations are becoming more common. How does core volume and, for that matter, multi-site deployments actually drive revenues?

So in multi-site deployments, first of all we are seeing trends of additional call volume in several sectors that we are serving. We heard from one of the -- our telecom customers recently that his 3G customers are generating 2.5 times more call than there is 2G customers.

So we are seeing that there is a growing number of calls.

Going to the multi-site, obviously when a customer is consolidating, overall he has less channels and less line because the topology is more efficient. However, this provides an opportunity to us because, first of all, he's repurchasing equipment and repurchasing licenses, so it results in additional net revenues for us, and secondly, the deployment of additional applications is easier and is done in a broader scale. And therefore, it also boosts applications.

I understand on the multi-site side. But in terms of core volume, what does that do to your revenues? Is it just simply larger databases and therefore higher revenues associated with it?

No, with our additional call volumes, it means that we are selling additional licenses. Our model, in terms of capital spending, is that we are selling licenses based on a -- increased recording. They are more [agents] and we're making more recording and this is -- comes to the bottom line. We are leaving to this margin the additional recording today.

Got it. In terms of backlog, Dafna, in the past the Company's talked of quarters of backlog. I think you were regularly at about two quarters with revenue growth. Is that still the right way to think of it or is it now more than two quarters of backlog?

It's a bit more than two quarters of backlog right now.

Great. Last question. The ACTIMIZE product is now being quite widely adopted. Is there a network effect taking place within your customer base, whereby it's just easier for everyone if all of the accounts parties are on the same system?

Our vision for ACTIMIZE is to buy -- this is, by the way -- is the trend in the deal that we announced this morning, is to move from a dualistic solution and enterprise-based solution for forward and risk management. And by doing that, we have a very large room for expansion within the ACTIMIZE business.

Jonathan Kreizman, Oscar Gruss & Son, Inc..

A couple of questions on my side. First of all, regarding the $55 million announced this quarter with the security sector, how much is this changing the competitive landscape regarding competition? Has this changed anything?

I don't think it will change much about competition. It would change much about NICE. This is for us a major milestone, being able to win and deliver such a large project.

So, we are focused on the impact that it makes for NICE. It serves as a reference to our delivery capability. It provides confidence to our sales force. It enables us to develop cutting-edge technologies. It's not changing us and then, of course, it improves our competitive position.

Secondly, putting aside the financial verticals, if this recovery and stimulus plans related funds, what major opportunities are you seeing as verticals? Maybe looking at healthcare? Any of these sectors which you think are more promising going forward?

We have seen some of the stimulus funds moving in our pipeline in the critical facility and the transportation sector in the U.S..

Any word on healthcare as an opportunity?

Healthcare is an opportunity. I'm not aware of stimulus funds that are there, but I will now send the sales force to chase after this opportunity.

Happy to be of help. Thanks.

Robert Schwartz, Collins Stewart.

I have two questions. First is about headcount. Where did it end up in the quarter and where do you see it going in Q4 and in 2010? And maybe you could help us understand where you are going to deploy those resources within NICE.

And second question, what is getting the large money center banks to make the security issues a top priority when they seem to have a lot of moving parts and a lot of balls in the air?

Let's start first with the banks. First off, though, there is a very clear business case when you are dealing with a fraud. One is the revenue that is being lost because of fraud, which is larger than the solutions that we are providing. And second is the total cost of ownership that is associated with operating silos compared to operating holistic solutions like the one that we provide.

So, it comes most from the -- I don't know to call it -- the crime prevention part of it and also from the operating cost part of it. This is on the fraud.

On the compliance side, we anticipated -- we are anticipating and even seeing some evidence for additional regulatory in terms of compliance, which will drive additional use of our system and additional implementations.

And that's in North America, Europe, and APAC?

This is in North America, Europe, and -- on the banking -- on the risk, it's also in APAC. On the compliance side, I'm not sure.

I guess it will go to APAC, but I'm not familiar with a concrete initiative right now. But it might be. It might be the [time] I'm familiar with.

Okay, and about headcount?

At headcount, we are over 2,500 people worldwide. We've been adding people as a result of the recent acquisitions and we are constantly hiring the most -- the focus areas in hiring was the sales organization. We've built -- we've strengthened our sales organization in several parts, a lot in emerging markets.

Recently, we also -- we're investing more on the R&D front and some on the service front. These are the main areas.

There are no further questions at this time. Before I ask Mr. Bregman to go ahead with his closing statements, 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 1-888-269-0005. In the UK, please call 0-800-917-4256. In Israel, please call 03-9255-921. And internationally, please call 9723-9255-921.

Mr. Bregman, would you like to make a concluding statement?

Thank you. Thank you all for joining us today for the call. And have a nice week. Thanks.

Thank you. This concludes the NICE Systems third-quarter 2009 results conference call. Thank you for your participation. You may go ahead and disconnect.