NCR Voyix Corp (VYX) 2009 Q1 法說會逐字稿

Welcome to the Retalix conference call.

As a reminder, this conference is being recorded May 14, 2009.

Leading the call is Retalix President and CEO, Barry Shaked.

Joining him is Hugo Goldman, the Company's Chief Financial Officer.

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

These statements include comments regarding the guidance and expectation about revenues, net income, margin and expenses, Company's ability to cash flow and profitability and to cut expenses, expectation about the Company's expected pipeline of customers, anticipated in mind for the Company's software products and management's expectations as to the Company's future financial performance.

Such forward-looking statements are subject to risks and uncertainties and, therefore, Retalix claims the protections of such statements contained in the Private Securities Litigation Reform Act of 1995 and other securities laws.

Actual results may differ from those discussed today and we'd like to refer you to a more detailed discussion of these risks and uncertainties contained in today's press release and the Company's filings with the SEC and, in particular, on Form 20 S.

Also, I'd like to remind you that Retalix reports its operating income, net income, gross margins and earnings per share on both a GAAP basis and on an adjusted non-GAAP basis.

Today's press release includes a reconciliation of the non-GAAP information to the most directly comparable GAAP information and its posted in the investor section of the Company's website at www.retalix.com.

Now I will turn the call over to the CEO of Retalix, Barry Shaked.

Thank you, Tes.

Welcome and thank you for joining us on this call.

Today we are going to discuss the results for the first quarter of 2009 and the current market environment.

This morning we reported our financial results for the quarter ended March 31, 2009.

The results reflect our successful efforts to enhance operating efficiencies and optimize programs to address the anticipated revenue decline.

Our goal is to ensure we meet customer needs while also maintaining profitability in our operations.

During the first quarter we achieved over $3.4 million in profit from operations versus a loss of nearly $1 million from operations in the first quarter of 2008.

This improvement is despite almost 13% decline, $7 million in revenues this quarter versus the year ago period.

We incurred high financial expense in the quarter related to our efforts to hedge out current exposure and currency concentration costs, but we were still able to achieve three quarters of a million dollars of profit for our adjusted net income non-GAAP for the period.

We also continue our efforts in the first quarter designed to achieve a strong cash flow.

Our focus on collections, operations efficiencies and cost savings resulted in more than $20 million in cash flow from operations versus just $400,000 in the year ago period.

While we expect cash flow will moderate during 2009, this continued effort in the last six months resulted in an increase of close to $33 million of cash and ensured that we begin the year on a very strong footing.

Market conditions remain largely unchanged and retailers and distributors continue to be very cautious.

They are carefully reviewing all technology investments and focusing on specific applications that can provide quick operational improvements and meaningful returns on the investments.

(inaudible) programs are one example of the application retailers are pursuing to help them address their customers.

During the first quarter we received two new assigned (inaudible) applications from tier one retailers, one in Asia Pacific and another one in Europe.

Also during the first quarter Coca-Cola Puerto Rico bottlers began deploying highly integrated suite of retail and enterprise and supply chain solutions at three distribution centers in the region.

Coca-Cola is leveraging the full power of our integrated supply chain offering including Retalix power enterprise, power warehouse, power analyzer and power PDA sales as well as Retalix yard management, dock scheduling and Retalix power net.

Our pipeline remains solid and our goal is to ensure that we continue to support our customers and current programs.

We are working closely with our customers to understand the need in the current market environment and to highlight ways in which we can help them improve operations.

Now let me call put the call over to Hugo to review the financial results for the quarter.

Thank you, Barry.

Reflecting the market conditions, total revenues during the first quarter were approximately $46.9 million.

This is compared to $53.9 million in the same quarter a year ago.

The reduction in revenues impacted all areas of our business.

Our product revenues in the first quarter length represented just over 27% of our total revenues versus just under 29% in the year ago first quarter.

The percentage of revenues coming from software licenses is traditionally low in the first quarter.

This year it was approximately 13% in Q1.

Hardware represented just over 14% of total sales.

Service revenues were almost 73% of total sales during the first quarter or $34 million versus 71% of sales in the year ago first quarter.

Maintenance revenues were 28% of total sales.

Positively impacting revenues during the first quarter was the completion of a successful arbitration.

The result was a positive contribution of $1.7 million to our service revenues on the further $0.2 million in reduced cost in our G&A.

As Barry mentioned, the execution of the internal improvement plan that we launched at the beginning of 2008 continues to contribute to our improved operations.

Despite the lower revenues during the quarter, our overall non-GAAP gross margin was 46% this quarter.

Our non-GAAP gross margin on services was almost 45% in the quarter.

Operating expenses are down 26% or about $6 million versus the year ago first quarter.

This included improving operating efficiencies and the reduction in our R&D expenses and total number of employees.

As a result net income from operations reached $3.4 million in the first quarter versus a loss from operations of just under $1 million in the year ago first quarter.

A number of other factors also impacted our results.

We had higher financing expenses this quarter, mostly related to shift in currency and our efforts to manage our currency exposure.

Last year you will recall that Retalix incurred expenses related to the weakness of the US dollar for most of the year or close to $6 million.

For 2009 we conducted a number of forward transactions in order to protect our operations and budgeted expenses from exchange rate differences.

However, the US dollar rose to levels that are higher than anticipated we were forced under accounting rules to recognize approximately $2 million expenses in the first quarter related to the total value of all of our hedges from 2009.

Approximately $300,000 of these expense was related to the first quarter were the remaining $1.7 million related to the value of the [four contracts] over next three quarters.

If the value of the US dollar remains at current levels for the remainder of the year, we will not have to recognize further financial expenses in the next quarter related to these foreign [contracts].

However, if the value of the US dollar relative to the Israeli shekel declines, our expenses in the next quarter will be lower and we will be able to recapture some of the expenses recorded in this quarter.

Also, during the first quarter we incurred approximately an additional $1.6 million in finance costs related to exchange rate differences that are related to the strengthening of the dollar against other currencies on their impact to a non-dollar net assets, especially the British pound and the Israeli shekel.

You will note the change in the way we are presenting our GAAP net income on treatment of the minority interest in the associated companies totally.

This new treatment is in keeping with the financial accounting standard 160.

It is only a change in presentation and does not reflect any changes in our structure or operations.

For future comparisons, starting this quarter the line formerly called net income loss is now called net income loss attributable to Retalix Limited.

On a GAAP basis the net loss attributable to Retalix Limited was reduced by half to nearly break even at $0.26 million versus a GAAP net loss of $0.53 million in the March 2008 quarter.

The adjusted non-GAAP net income declined reflecting the lower revenues but remained profitable at $0.75 million compared to $1.2 million.

The reduced cost along with Retalix collections effort has helped to generate over $20 million from operating activities during the first quarter.

This compared with $400,000 during the first quarter of 2008 and $12.3 million in cash flow from operations for all -- for Q4 of 2008 and $13.2 for all 2008.

Approximately $4.5 million out of the $20 million are derived from tax refunds related to (inaudible).

Total accounts receivable amount to do approximately $56 million at the end of the first quarter compared to approximately $74 million at the end of 2008.

We will continue to focus on receivables during 2009, but our expectations are that cash flow from operations will moderate reflecting the current challenges in the market and declines in revenues during the recent quarter.

DSO in the first quarter was 135 days compared to 141 days at the end of 2008.

As of March 31, 2009, our balance sheet has $56.9 million in cash, cash equivalents and marketable securities up from $37.6 million at the end of 2008.

We continue to operate with practically no debt on the balance sheet.

Finally, let me remind you that we will be reporting impairment on goodwill charges against our 2008 year end results as previously reported in the announcement of year end results on March 17, 2009.

Each year the Company is required under accounting standard 142 and 144 to review the value of its assets including the goodwill and other intangible assets carried on the balance sheet.

Due to the economic conditions which have resulted in both a decline in the Company's market capitalization and the decline in the Company's estimated forecasted cash flows, Retalix's management performed an impairment we showed an indication of impairment, Retalix has almost completed this impairment test and is close to determining the final amount of the GAAP non-cash impairment charge which is currently expected to be in the range of $50 million to $65 million net of tax.

These non-cash GAAP charges affecting goodwill acquired in the past will be reflected in the Company's reported GAAP earnings and per share earnings for the year ended December 31, 2008, which will be included in Retalix' annual report to form 20 F with the US Securities and Exchange Commission.

In conclusion, while our first quarter revenues were impacted by current business conditions, we have been successful in operating efficiencies and managing our operations to maintain profitability and improve cash flow.

Now I will turn the call back to Barry.

Thank you, Hugo.

As we discussed on our year end call two months ago, we expected retailers and distributors to remain very cautious entering 2009.

This is largely what we experienced during the first quarter.

We also continue to take a very cautious view while we wait to see how business around the world will address the continuing challenges in the markets.

As we told you on past calls, in speaking with retailers and distributors we continue to hear that they are looking for ways to enhance their operations, preserve capital, reduce unnecessary inventories and strengthen their relationship with the customers.

I continue to believe that some of the big investments in new technologies will continue to be slowed, but operational specific applications and ones with strong ROI's are most likely to proceed.

Generally speaking, retailers are not currently looking to large multiyear programs to upgrade, for example, their POS system.

While we believe this will happen, many retailers are deferring these investments until they have a better understanding of the future business environment.

Retailers, however, understand that technology solutions can help them reduce expenses, increase productivity and increase [share of wallet].

We continue to receive good interest in specific applications that can be implemented quickly and produce meaningful operational improvements and returns on the investments.

Retalix have proven solutions that help retailers in the critical areas of their operations.

During the first quarter, for example, a small but fast growing supermarket chain in the US deployed our headquarter-based price management software.

This is a centralized rule based prize management solution that enables grocers to ensure consistent execution of price strategy and provides a high level of confidence in their price integrity and efficiencies across stores.

Based on the current market environment we are, however, maintaining a conservative outlook for 2009 while working to maintain profit margins by enhancing efficiencies and, where necessary, taking headcount reductions.

During the first quarter of 2009, we further reduced our headcount by more than 100 employees worldwide, putting us at 1,238.

These reductions were taken across all areas of the company.

As we outlined on our year-end conference call, we are focusing Retalix fiscal year 2009 revenues to be between $180 million and $200 million, GAAP net income to be between $1 million to $6 million, and adjusted non-GAAP net income to be between $5 million and $11 million.

We will continue to closely monitor the global economy progress and adjust our plans up or down as the year progresses.

We appreciate the dedication efforts of our employees worldwide during these difficult days and the continuing focus on driving our profitability.

We also appreciate your continued interest and support.

Thank you for your attention and now we are open to answer your questions.

Operator.

(Operator Instructions) The first question is from (inaudible) of (inaudible).

Please go ahead.

Hi, this is [Julia] calling on behalf of (inaudible).

Can you please provide a further updates regarding the bidding process and the status?

As we said on our last call, it is our policy not to comment on such items.

If there will be anything to update we will update.

Okay.

What is the expected effective tax rate next quarter?

The effective what?

Effective tax rate for next quarter.

It's about 25%.

All right.

And what are your expectations for OpEx for next quarter?

The OpEx for next quarter we are expecting to be a bit above Q1.

All right.

Okay.

Thank you so much.

You're welcome.

(Operator Instructions) There are no further questions at this time.

I would now like to turn the call over to Mr.

Shaked.

Mr.

Shaked, would you like to make a concluding statement?

Thank you very much and speak to you all next quarter.

Good bye.

Thank you.

This concludes the Retalix first quarter 2009 results conference call.

Thank you for your participation.

You may go ahead and disconnect.