NCR Voyix Corp (VYX) 2005 Q1 法說會逐字稿

Good morning.

My name is Keela and I will be your conference facilitator.

At this time, I would like to welcome everyone to the Retalix first-quarter fiscal year 2005 earnings call. (OPERATOR INSTRUCTIONS).

Thank you.

I would now like to turn the call ever to Crocker Coulson.

Sir, you may begin.

Thank you.

Welcome, everybody, to Retalix's first quarter 2005 earnings call.

Leading the call today is going to be Retalix's Chairman and CEO, Barry Shaked, and with him is the Company's Chief Financial Officer, Danny Moshaioff.

Barry is going to cover the highlights of the first quarter and discuss some of the important drivers in the enterprise software market for the food and fuel retailing industry.

After that, Danny will discuss the financial results in more detail, and then we are going to open up the call to your questions.

Before I turn the call over to them, I'd like to remind our listeners that in this call, management's prepared remarks do contain forward-looking statements.

Management may make additional forward-looking statements in response to your questions.

Such statements include comments regarding anticipated demand for Retalix's enterprise software products, the completion and integration of acquisitions, the successful implementation and rollout of existing software license agreements, the success of product development and integration projects, the Company's competitive positioning, and management's expectations regarding the Company's future financial performance.

Such forward-looking statements are subject to risks and uncertainties.

Therefore, Retalix claims the protection afforded by the Safe Harbor for forward-looking statements as contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from those discussed today.

We would like to refer you back to a more detailed discussion of these risks and uncertainties the is contained in the Company's filings with the SEC, and in particular on the Form 20-F.

For those of you who are unable to listen to the entire presentation today, we're going to make a recording of it available for 90 days.

You can access that at the Investor Relations section of the Retalix web site.

With those formalities of the way, I'm now going to hand the call over to Retalix's CEO, Barry Shaked.

Thank you Crocker.

Good morning to our listeners in the U.S.

Good evening for those of you joining us in Israel, and welcome to all of you.

With all of the international activity we have had recent quarters, one could now say that the sun never sets on the Retalix global customer base.

As most of you know, this has been an extremely eventful quarter for Retalix.

We recently announced 2 very strategic acquisitions.

We have expanded our sales and support network into new corners of the globe.

We are installing solutions with our very first customers in China, Japan, and India, and we have been preparing for the upcoming launch of our next generation solutions for supply chain and warehouse management.

With all of this going on, I'm pleased to say that we have not dropped our eye off the ball for the second, and are executing extremely well in winning new accounts and supporting the needs of our global customer base.

This is reflected in our results -- what we reported earlier today for the first quarter of 2005.

First quarter revenues were up by 31% to $33.8 million.

Net income was up to 2.4 million.

Earnings per diluted share grew to $0.13 from $0.05 a year ago.

We generated 3.2 million in operating cash flow during this quarter.

I should point out that our profitability is trending upward even as we maintain a very robust level of investment in R&D.

In addition, we are investing in future growth by deploying our balance sheet to make strategic acquisitions that enrich our product offering, broaden our addressable market, and strengthen our competitive position in the food and fuel industry.

Our first-quarter results confirm that 2005 is off to a very good start for Retalix.

Danny will discuss our financials in greater detail.

First, I want to mention a few of our operational achievements and our outlook for the balance of the year.

Strategic acquisitions -- right after the close of the first quarter, we announced 2 separate acquisitions that I believe will make a major contribution to Retalix future success.

The acquisition of IDS extends our footprint to now cover the enterprise resource planning system used by many of the largest distributors serving the grocery, convenience stores, and food service segment in North America.

Retalix has now become the largest player in that market, and we have a product portfolio that covers the complete retail value chain, including customers, store operations, headquarters, warehouses, distributors, and manufacturers that no other software suppliers serving the food retail industry can match.

In addition, IDS will enable ask to offer an integrated ERP solution to our existing customer base, in particular small and medium-sized chains that are currently underserved by the large enterprise software vendors.

IDS also has a strong presence with distributors serving the food service industry.

We have not previously focused on the segment -- like food retailers, food service operators are now very eager to improve operational efficiencies through the supply chain integration.

This may lead to some compelling opportunities for Retalix in the food services segment, given the strength of our supply chain and warehouse management offerings.

We simultaneously announced acquisition of TCI Solutions, which is expected to close in the second quarter of 2005.

TCI is a provider of strategic pricing, merchandising and inventory management solutions for grocery chains.

TCI's retail product is deployed in 30% of the top 75 chains in North America, including a number of chains that currently use Retalix POS, supply chain and warehouse management applications.

Acquiring TCI enables us to consolidate our leadership position in the grocery industry and transit (ph) our product offering in merchandising an inventory management.

Both of these acquisitions serve to substantial -- strengthen our human capital and management bench (ph) strength in order to support our future growth.

In fact, Retalix is now becoming a magnet for many of the most experienced and professional in the food retail software industry.

I believe that the recent $617 million acquisition of Retek by software giant Oracle and has caused both attractiveness of the retail application business and the soundness of our strategy.

Global retailers are looking for technology partners who can combine prudent solutions and industry-specific expertise with the ability to support and integrate enterprise-wide application investment.

In the food and fuel segments, we believe that Retalix is uniquely positioned to capture this opportunity.

We are pursuing our Synchronized Retail strategy with single-minded focus.

This is now providing us with a strategic advantage over both established hardware vendors and single points software solutions.

And we will continue to pursue acquisitions that expand our addressable markets and extend our competitive edge.

Next generation solutions -- during 2004, we made a very intensive investment in rebuilding the supply chain management application we acquired with OMI International, and building our Synchronized Retail engine, and developing next generation solutions in high-priority areas such as Customer Loyalty, demand focusing, and (indiscernible) (technical difficulty) buyer.

We are now seeing a solid return on these investments.

Our Customer Loyalty application is now proving to be an important discriminator in winning new Tier 1 accounts, given the importance that food retailers are placing on this area.

Retalix has the only robust loyalty solution that is fully integrated with data generated and functionality of point-of-sale.

Our DAX computer-generated ordering application has proven very compelling, improving -- improvements in stock out (technical difficulty) inventory turns for customers that have deployed this functionality.

And our new supply chain management platform will be coming to market over the balance of 2005.

Our new product information management application is scheduled to be released in June.

Our pantry of original and bioterrorism what we refer always as (indiscernible) bio application will go live with a major U.S. grocery chain in July of 2005.

Our next generation procurement solution is scheduled for release in October, and the new Retalix warehouse management solutions will be released by the end of this year.

These new enterprise applications are creating tremendous customer interest due to the high return on investment and alignment with retailers' stated IT priorities.

By the end of 2005, we will have our entire suite of new supply chain applications launched, which we believe are the most sophisticated and robust solutions in the marketplace.

North America wins and market trends -- we continue to see strong growth in North America during the first quarter.

U.S. grocery chains are deploying our solutions to consolidate and modernize their IT systems, achieve efficiencies in the store operations and order, and drive more customer-centric modes of operation.

We received an additional 55 store orders from Hannaford Bros. division of Delhaize America to complete a chain-wide rollout and Redner's Warehouse Markets is in the process of deploying our DAX demand forecasting and ordering solution.

On the convenience fuel side, we have very strong interest in our Customer Loyalty application with several large chains slotted to go live in the second half of 2005.

We have had an order to restore Retalix Pocket Office at 110 Quick Chek stores.

We completed the StorePoint POS rollout at 168 Loan USA convenience stores.

And Casey's General Stores reached a key milestone, completing the rollout of 1000 StorePoint sites.

And I'm also very encouraged by the success of our StoreNext joint venture with Fujitsu in taking this vision of Synchronized Retail to the independent grocery sector in North America.

We now have over 600 stores connected to our StoreNext, another 500 that have signed on and our targeting to be in store during 2005, hopefully reaching to the mark of 1500 to 2000 stores signed up by the end of 2005, and an additional 2000 in 2006.

I believe these figures will start attracting suppliers looking at the StoreNext joint venture.

On the international side, we expect that international sales will grow at a very robust clip in 2005.

Our global retailing customers are continuing to enter new geographies and new categories supported by Retalix solutions, and we are very well-positioned as your Europe-based mega retail chain selects the software partners to upgrade their global IT systems.

We are preparing to begin rolling out our StoreLine applications to 3000 franchisees of the French-based into Intermarche Group across France, Spain, Portugal, Belgium, and Poland.

I am pleased to say that our solutions have been selected by another Tier 1 European chain, and pilots are expected to be rolled out at the middle of this year.

In Japan, we went live with StoreLine and our web enabled suite of enterprise solutions at Drug-Eleven.

And in Israel, the Tiv Ta'am chain has installed over 100 Retalix POS terminals in the new multi-format flagship store.

In Latin America, we formed a new strategic partnership to provide efficient sales and support to this region that has already generated promising prospects for Retalix solutions.

Taken together, the first quarter of 2005 has been very eventful and successful for Retalix.

We have a strong pipeline of new products' introduction slotted for the balance of 2005.

We continued to be the partner of choice for global retailers as they look to upgrade enterprise-wide IT systems.

And we are making a strategic acquisition that accelerates our growth, expand our addressable market and extend our lead over the competition.

With that, I will turn the call over to Danny to discuss Q1 financials in more detail.

Thanks Barry.

Net revenues for the first quarter amounted to $33.8 million compared to $25.8 million in first quarter of 2004, an increase of 31%.

Our gross margin for the quarter were 67.3%, but I expect it to decrease by about 3% to 4% due to a recent acquisition that has a higher service content in their revenues.

Total operating expense for the quarter were $19.6 million compared to 16.1 in first quarter of last year, an increase of 21.9%, and lower than last quarter's expenses by expenses by about 1.9 due to a reduction in R&D expenses related to the rewrite of our supply chain management system.

Operating profits for the first quarter amounted to about $3.2 million compared to a profit of $1 million in the first quarter of '04. (technical difficulty) This again is due to a reduction in (indiscernible) the reduction in R&D expenses.

As we previously discussed, our patterns of revenue and profits -- our first six months of 2005 will be lowered (indiscernible) in terms of profits and revenues, and that's mainly because of shifting in license revenue to third and fourth quarter.

This year will follow the same pattern.

This influence is, of course, growth in operating margins also.

Net profits for the quarter were $2.4 million (technical difficulty) 4.8 first quarter '04, again an increase as a result of (technical difficulty) operating expenses.

Earnings per share for the quarter were $0.13 per share fully diluted, compared to $0.05 per share in the first quarter of '04.

The number of shares for the period were 17,656,000 and the fully diluted number is 18,576,000.

Cash and marketable securities amounted to $112.8 million on March 31st compared to $111 million on December 31st.

On April 1st, this amount was reduced by about $30 million due to the cash portion of the recent acquisitions.

Long-term financial liabilities, including account (ph) maturities, were $5.4 million compared to $6.3 million in December 31st of '04.

Operating cash flows for the quarter were $3.2 million.

Our DSO was about 63 days, similar to last quarter's number.

Our shareholders' equity amounted to $161.6 million out of $208.7 million total balance sheet, close to 77%, which indicates a very strong financial position.

This completes (technical difficulty) review and I will -- back to Barry.

Thanks Danny.

Based on the first quarter results and the positive trends we are seeing, we feel very confident about reaching our stated financial goals for 2005.

Just to remind you, we have increased our estimates to exceed $185 million in sales and $15 million in net profits.

We see room for continued rapid growth in 2006 and beyond.

Food and fuel retailers are continuing to invest in IT in order to replace obsolete hardware platforms and homegrown software solutions that simply cannot support their business objectives.

Retalix solutions are directly aligned with these retailers' top business and technology imperatives.

There are billions of dollars of software spend at stake, and we are leading the process of the industry consolidation in the market that is looking for leadership.

With that, I would like to return to the operator for questions and answers.

(OPERATOR INSTRUCTIONS) Joseph Wolf, UBS.

In the thanks.

A couple of questions.

The first is just from a margin perspective, Danny, a little bit better in the first quarter than we had expected on the gross margin side, so I am wondering if you could give us an update now that the acquisitions are going to contribute (technical difficulty) how we should think about the gross margin in the base case (technical difficulty) other changes?

And then, Barry, I'm hoping that you can go into -- maybe talk about the international opportunity further, certain regions where Retalix has not yet participated, and there are some interesting opportunities (technical difficulty) that are evolving as well, or is it the same places that we've been talking about in the past?

Joe, in terms of margins, I think we discussed -- this is -- we had this quarter over 67 -- a few quarters back, we had between 66 and 67.

I think somewhere between 62 and 63 going forward will be the number for the next few quarters.

This is Barry.

And looking at our opportunities on the international side, countries like Spain, growing (ph) Italy, Germany, some simple European and Eastern European countries or regions that are very exciting in terms of opportunity.

Not to talk about our success, what I mentioned with China, Japan, and India, that is just the beginning of the success in those regions.

Mark Verbeck, Smith Barney Citigroup.

Thank you.

Congratulations on the quarter gentlemen.

Now that some time has passed since you made the acquisitions, can you give us an update on how integration is going, and just some expectations in terms of what the roadmap looks like for when you get normalized in terms of any cost savings that you might be able to achieve?

First of all, we've had a series of meetings between upper management, middle management, sales force, and so on of both IDS, TCI, and Retalix USA.

Actually, the top management of those two companies are currently in Israel, where I am at this moment talking to the management chain in Israel of strengthening our integration and sales opportunities in the international side of things.

So from a human capital point of view, I've seen great synergies between the sales organization, support organization, and development organization.

So that is on track, although for the first 90 days we are keeping things as is and not planning to make any changes.

We will see some synergies starting to be realized more in the third quarter and fourth quarter.

But those synergies are more around the general administration things like finance, because the amount of professional people that we've found -- not found, have joined -- the Retalix group are so valuable for us that we've got such a lot to do with them.

I do not see any need for cost saving; actually just generate more and more revenue and profit with those things.

On the general and administrative, as I mentioned, will see some of these savings probably in the fourth quarter.

Okay.

I know you said that you're going to have an integrated supply chain component, but help me understand what the sales force looks like, who's selling what.

You basically have overlapping salespeople in particular areas for different products, or can you just help me understand what that will look like?

As you know, we have got 2 divisions in North America -- the supply chain solutions division and the retail division.

When the sales force goes out and introduces the Retalix portfolio, growing interest now, in any moment of time some retailer is looking for some solution in one of the Retalix products.

If it's on the supply chain side, if it's on the retail side, if it's on the store of the headquarters, and the same with distributors.

And the salespeople are drawing in their product experts depending on what the retailer is looking -- or the customer is looking for at that specific moment.

So that is working out very well.

That has been the way that IDS, TCI, and Retalix has been working in the past, so it's very easy to put the model for the future.

Okay.

And then, Danny, for you a question -- can you comment on deferred revenues?

Actually, last year from Q4 to Q1 spiked up a lot more than it did this year.

Can you tell me what's going on there?

I don't think that the numbers are not significant.

You mean the 4.9 compared to the 5.8 or the difference between?

Actually, just looking at the 5.9.

Compared to a year ago it was 6.2 and actually sequentially, it jumped up a lot more year ago.

Yes, but this year it's mainly the maintenance stuff.

Last year, we have also some other deferred that we didn't recognize.

So it's a few maintenance now.

Okay, great.

Thanks a lot.

Roni Biron, Oscar Gruss.

Congratulations on the quarter.

Barry, could you provide us with geographical breakdown this quarter?

Yes, it's similar with both -- international portions this quarter was higher than usual.

It was I think about 10% Israel, about 38 international, and 52 U.S.

Seems like despite ongoing -- despite the fact that you are growing your revenues in the U.S., it seems that you are more successful in generating new Tier 1 accounts outside the U.S.

Can you comment on the decision-making process of larger retailers in the U.S., whether it slowing down or looking up?

First of all, we see some kind of cycle -- a different cycle between the U.S. and the international.

And each one is looking at things at a different time.

Don't forget the U.S. is currently very pressurized by the Wal-Mart effect.

And most decisions are around how do I provide a differentiator between me and Wal-Mart, whereas the European retailers have fruit that they can beat Wal-Mart on their home ground, and they are making different decisions.

So that is the difference cycle and trend in the marketplace.

Doesn't Wal-Mart effect trigger overall replacement of ITC's point-of-sale systems?

The Wal-Mart effect triggers 2 things -- very short-term ROI decisions and longer terms and longer decisions on a different platforms.

And one last question, can you repeat the numbers of subscribers to your connected services and your target at the end of the year?

In connected services, we expect to reach about 2000.

And right now you're at --?

600.

Okay.

Thanks very much.

Tad Piper, Retalix.

Or Piper Jaffray as the case may be.

Just wanted to -- actually a couple of questions about the StoreNext business and your expectations there.

Obviously 600 live today, 2000 by the end of the year; when do you expect -- it seems like you're on schedule for ramping up of subscribers, but it seems like you're maybe a little bit behind where you expected to be from a profitability standpoint within that business.

Can you just talk about that business, when you expect it to become more profitable, and just more expectations for that specific business line?

First of all, I just want to clarify that my answer about connected services A, related to the U.S., B, over and above the 600 -- I mentioned before that this 500 have already signed up and are in the process of being joined up.

So in practice, we got actually 1100 in the U.S.

That does not include Israel which is virtually 40% of the retail market and 90% of the suppliers.

Looking at the StoreNext, we still see StoreNext in investment mode, and we will run that as a breakeven, marginally profitable 2005 and 2006.

That is our strategy.

All the profits will be invested in creating more and more value.

As you know, once we get it to 10,000 and up, the amount -- the profitability of that business is tremendous.

Okay.

And the main investments there that you're putting back into the business, is that related to increasing sales and marketing efforts or --?

Sales, marketing, products, but mainly sales and marketing.

Okay.

Maybe you could just talk high-level about the POS upgrade traction.

I think there have been a lot of talking in retail about it.

I think it's been maybe not quite the pace that people would have anticipated.

But within your business, can you give us some idea of what kind of deals are led point of sale upgrades?

And where do you think we are in the process of upgrades?

I would agree with you that it is running at a lower pace to analyst expectations. 70% of the grocery markets are still installed with proprietary POS systems and operating system.

I think the Wal-Mart effect has shuffled decisions around quicker returns on investments than full POS turnaround.

And I think that we will see more towards the end of the year decisions that have been delayed, and I know that a lot of decisions have been delayed from our point of view and not won.

Okay.

And just to get some color on that, why the latter half of the year?

I just curious as to what happens in the latter half of the year to get people back focused on that.

I believe that it's -- they're finishing the implementations and the buying of these quicker ROI products.

It's a demand forecasting or setting up the headquarters to handle the sophisticated POS solution.

It means if you got a great solution but your headquarters cannot handle it, it doesn't really give you the advantages.

So we've seen people buying more of those kind of solutions and then coming back to the POS.

And Danny, just to understand from acquisitions, I'm just trying to figure out how we should understand it in the near-term.

You're talking about things from a license revenue standpoint, obviously being much more robust as has been the case in the past from the last two quarters of the year.

But as we specifically look just as the June quarter with the acquisition, I was hoping you could give us more color on the near-term revenue contribution and cost implications, just to make sure we have got that modeled correctly.

Yes, guidance actually for the delta coming from the acquisition, if we -- our previous guidance was 150 and now 185, so that an addition of 35, 36 million I've divided over the three quarters (multiple speakers).

Okay, so the acquisition is not going to be particularly back end loaded.

That is going to be more ratable?

Yes.

Okay, and what about on the expenses side?

I'd say about the same.

And we gave some kind of indication of how it will affect the bottom line, so the delta showed the other expenses.

Okay.

And as far as the tail in OMI-related R&D expenses, how much of an incremental down tick would you expect to see from that in Q2 versus what we already saw in Q1?

Yes, we are now under 25, and I think will keep dropping by maybe 2, maybe 3 points.

Okay.

As a percentage of revenue?

Right.

Okay, 2 to 3 points immediately, in other words?

Yes.

Over the next 3 quarters.

Okay.

You want to give us any more color on sales and marketing expenses as a percentage of revenue or G&A?

I think this is also for us a new experience.

I think this is the first indication of where we will go.

I think when we meet on the next conference call, we'll all be -- give you much brighter colors.

Okay.

And just to clarify two other quick things.

Share account expectation for June -- and I just wanted to make sure for the cash balance at April 1st, what did you say that was?

It was 50 million less than what we have now.

So --

Okay.

And the share count?

Share count was 18.576 and you know counting for vested options, something like between 50 and 100,000 per quarter.

Okay.

Thank you.

Joseph Wolf, UBS.

Thanks.

Just a follow-up on that last question.

With the drop in 50 million in cash, is that the right number for running the business going forward?

I know you have been generating cash, but is that the right cash balance or is the Company looking at options? (technical difficulty).

Joe, you've broken up.

Can you repeat that?

I'm sorry.

Can you hear me now?

In terms of the cash balance now that it's down 50 million, I'm wondering what you see as the appropriate amount of cash to run the business, not from an operational point of view because clearly you're generating cash, but from perhaps a customer comfort level point of view?

Yes, we have more than enough for customer comfort level.

Raghavan Sarathy, Ferry, Baker, Watts.

Thank you.

I have a couple of questions just on the business.

I noticed that Valley Foods and Pet Club selected NCR advanced -- (indiscernible) solution.

I was wondering if you participated in this bid and why customers are so -- (indiscernible) preparing (ph) solutions or open (ph) systems?

And I have a follow-up.

Can you repeat the two names that you mentioned?

Valley Foods and Pet Club in San Francisco.

They selected in NCR ACS solution.

And so I was wondering what were some of the reasons why they have continued to go with that proprietary solution?

As you know, in the lower tiers, we are also selling a bundled solution of hardware and software, and that's the StoreNext model.

And we are seeing customers at that level making decisions on bundled solutions rather than a pure software application.

And that's the primary reason for selecting NCR or IBM.

Both of these competitors are excellent companies and people will continue to buy them.

So what you say that Valley Foods and Pet Club are among the Tier 3 and Tier 4?

Yes.

My follow-up question is Fossil recently selected SAP and IBM to provide integrated solutions and point-of-sale solutions to 120 store chains.

Now that you are moving more toward providing Synchronized Retail, stretching across the entire operations for the stores, I was wondering is it going to be increasingly important to have a strong brand name partner in your ecosystem to convince (indiscernible) to purchase (indiscernible) suites from you folks?

We will continue to strengthen our brand name in the food and fuel industry, and we believe that we will be the brand name over there, like SAP started as brand name for ERP, or a small name for ERP, and became the brand name for ERP solutions.

We believe that in the segment that we are active, we are the brand name and will strengthen our brand name.

Eran Yaakobi, Klal Finance.

(technical difficulty). (indiscernible) probably by another Company.

Do you see this scenario as a potential threat (indiscernible) and begin to compete (technical difficulty) with those two giants, and do you see any change in the competitive environment in the near future?

No, the grocery retail market needs flexibility, needs companies to react quickly, needs focus on their needs.

And I see this as an advantage against the big guys that are trying to create one big solution that fits everyone.

Tad Piper, Piper Jaffray.

Thanks guys, just a quick follow-up.

You talked about in the past some of the larger oil companies that for their community stores they have been doing some pilots.

Can you give us any upgrades on where the pilots are at, and whether you've gotten to a point now where you've got more visibility in the revenue because they've agreed to roll out more stores?

Thanks.

The pilots have been successful.

There are several dozens of stores running, and I believe that the revenue will come in 2005 and 2006 as expected, and onwards.

So is it fair to say that some of those pilots have moved to larger contractual obligations?

As soon as we can announce, we will announce.

Okay.

And as far as other -- have you begun any additional pilots with incremental oil companies?

In our pipeline, we have all the time got new customers and also in the oil company segment.

But we still retain our revenue forecasts of -- to exceed 185 for 2005 with a profitability of $15 million.

Okay.

Have any -- what I am really asking is any of that pipeline resulted in the beginnings of pilots?

Nothing that can at this stage change any forecasting.

Avshalom Shimi, HSBC.

Hi guys.

Congratulations for the results.

I was just wondering regarding the Tier 1 accounts you just announced, you didn't provide a name right?

No.

Can you maybe just -- (multiple speakers) elaborate a little bit about the competitive landscape?

Did you see the traditional names?

And how long did the selling process to control (ph) (technical difficulty) he made his decision regarding taking Retalix?

We can't give more much more information.

I can just say that it's one of the significant players in Europe.

In Europe?

All right.

And just my second question, a year ago, you mentioned -- I think it was the U.S. measure (ph) guide (ph), several statistics regarding the decision-making affected in the next two years.

That was a year ago, saying you are expecting acceleration of decision-making regarding replacements of Tier 1 and 2 clients, especially in the U.S. and across Europe.

Have you seen any evidence that this thing actually taking place, or do you think more further towards 2006?

I would say that in Europe we've seen that more happening, and in the U.S. slower.

But we were fortunate enough and planned enough ahead to see that the people will be buying other areas of the solution, like warehouse management solutions, enterprise solutions, buying and ordering systems.

And we've been equipped, with acquisition of OMI and our recent -- well, recently it doesn't affect yet our numbers, but we knew what the trend is and we -- it seems like we've been hitting our targets.

All right.

So if I understand you correctly, your numbers or your guidance to date takes into account for a lesser extent -- more Tier 1 wins rather than the more vertical approach you've been taking with the new acquisitions?

I didn't quite understand the question.

Can you just repeat?

Just saying that -- you're saying that the numbers you are guiding for are taking into account more the acquisitions you have made with the new products and solutions you are now offering, rather than aiming for additional -- let's say two Tier 1 wins and whatever Tier 1 can come during 2005?

Yes, they're taking into account what we see as our organic growth and where people will be buying, and taking into account that maybe -- not maybe, there is some slowdown in the point-of-sale decision, and taking into account that they may shift to 2006.

A long answer to a short -- answer should be yes.

We took that into account.

At this time there are no further questions.

I'd like to turn the call back over to the speakers.

Yes, I would like to thank everyone for joining and I'll be happy to -- that everyone will join me on our next conference call in three months' time.

Thank you.

Thanks a lot.

Thank you.

This concludes today's conference call.

You may now disconnect.