NCR Voyix Corp (VYX) 2009 Q3 法說會逐字稿

Welcome to the Retalix conference call. As a reminder, this conference call is being recorded today, November 17, 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 expectations about revenues, net income, margins, expenses and tax rates, the Company's ability to maintain cash flow and profitability and to cut expenses, expectation about the Company's expected pipeline of customers, anticipated demand for the Company's software products, and management's expectations as to the Company's future financial performance, as well as the expectation of the closing of the Company's pending private placement of ordinary shares.

Such forward-looking statements are subject to risks and uncertainties and, therefore, Retalix claims the protection 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 in the Company's filings with the SEC, and in particular, on its Annual Report on Form 20-F filed with the SEC on June 22, 2009.

Also I'd like to remind you that Retalix reported operating income, gross margin, net income and earnings per share on both a GAAP basis and on an adjusted non-GAAP basis. Today's press release includes a reconciliation of non-GAAP information to the most directly comparable GAAP information, and is 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. Mr. Shaked, please go ahead.

Thank you, Regan. Welcome, and thank you for joining us on this call. This morning, we are reporting our financial results for the third quarter and nine months ended September 30, 2009.

We achieved another excellent quarter of positive results that were in line with our expectations. Market conditions remained largely unchanged during the third quarter. As we discussed with you on previous calls, we anticipated soft market conditions that would result in revenue decline versus 2008. We are continuing to execute on our plans, and the third quarter results reflect our successful efforts to enhance our operating efficiencies and control our costs.

During the third quarter, we generated $3.5 million in profits from operations, versus $1.9 million from operations in the third quarter of 2008. This improvement is despite more than 10% decline in revenues this quarter versus a year ago.

For nine months ended September 30, 2009, we recorded close to $11 million in income from operations, versus $2 million in income from operations in the same period a year ago, and despite a 14% decline in revenues.

We also achieved a substantial improvement in our non-GAAP adjusted net income in the third quarter. We reported $5 million, or $0.24 per diluted share, which was nearly double the year ago results.

We also continued to achieve positive cash flow and maintained our strong balance sheet, while working closely with our customers to understand their needs in the current market environment.

Now let me hand the call over to Hugo to review the financial results in more detail.

Thank you, Barry. We reported $50.1 million in revenues for the three months ended September 30, 2009, versus $56.2 million the same quarter a year ago. For the nine months ended September 30, 2009, we reported $146 million in revenues, versus $169.5 million in the same period a year ago.

Looking at the revenue mix, our total product revenues in the third quarter represented nearly 32% of our overall revenues, over $16 million, versus 31.5% in the year ago third quarter.

As we said on the last call, we anticipated that in the third quarter, hardware sales would be a larger percentage of total revenues, due to the timing of certain customer transactions. Hardware revenues represented nearly 21% of total revenues in the third quarter, and as you know, hardware revenues have lower margins.

Revenues from the sale of software licenses continued to be soft in the third quarter of '09. They were approximately 11% of total revenues, which is similar to the level in the second quarter of 2009. However, license revenues compared favorably with a year ago third quarter, where license revenues were just 8.5% of total sales, as they were especially hard hit by the beginning of the global economic crisis.

Total service revenues were 68% of sales during the third quarter, $34.1 million, versus 68.5% of sales in the year ago third quarter, or $38.5 million. Maintenance revenues accounted for 26.1% of total sales in the third quarter.

We continued our efforts designed to manage our business, improve operating efficiencies and control costs, based on our revenue expectation. We continued to see the positive impact of these efforts.

During the quarter, our overall non-GAAP gross margin was 43.3%. Our non-GAAP gross margin in products was 34.5%, reflecting the larger portion of hardware revenues in the mix, and the non-GAAP gross margin on services was 47.5% in the quarter.

Operating expenses in the third quarter were down nearly 15%, or approximately $3 million, versus the third quarter of 2008. In the first nine months of 2009, we reduced operating expenses by 21%, compared to the first nine months of 2008. As a result, income from operations reached $3.5 million in the third quarter of '09, compared to $1.9 million in the year ago third quarter.

For the nine months ended September 30, 2009, we recorded $10.9 million in income from operations, versus $2.1 million in income from operations in the same period a year ago. This was achieved despite nearly a 14% decline in revenues during the first nine months of 2009.

During the third quarter and the nine months, we reported financial income of approximately $1.5 million. As we discussed on previous calls, Retalix hedged a portion of its currency exposure for 2009. Shifts primarily in the value of the US dollar versus the Israeli shekel resulted in positive adjustments to the mark to market value of our hedges, and the benefit of -- from currency translations related to the exchange rate for our non dollar assets.

On a GAAP basis, the net income was $4.2 million in the third quarter of 2009, versus $1.1 million in the year ago quarter. For the nine months ended September '09, GAAP net income was $9.8 million, versus $2.1 million in the year ago nine month period. The adjusted non-GAAP net income in the third quarter of 2009 was $5 million, nearly double the $2.8 million reported in the year ago third quarter.

For the nine months ended September 30, 2009, we reported $12.9 million non-GAAP net income, versus $7.1 million in the year ago nine month period.

This quarter's increased revenues, reduced costs and continued good collections, along with the timing of certain payments, helped us generate $6.1 million in cash flow from operating activities during the third quarter of 2009. This compared with $1.8 million in cash flow from operations generated in the third quarter of 2008. We have generated more than $36 million in cash flow from operations during the first nine months of 2009, versus under $1 million in the first nine months of 2009. Sorry, of 2008. After this strong nine months of cash flow generation, we expect Q4 '09 to be very moderate.

Total accounts receivable amounted to $59.8 million at the end of the third quarter, compared to $88.9 million a year ago, and $58 million at the end of the second quarter 2009. The number of days our sales are outstanding remained stable in the third quarter of 2009, that was would be at 106 days versus 105 days in the second quarter of the year.

As of September 30, 2009, our balance sheet shows $71.2 million in cash, cash equivalents and marketable securities, up from $66.3 million at the end of the second quarter of 2009.

Now, I will turn the call back to you, Barry.

Thank you, Hugo. First, let me touch on current market conditions, and the outlook for the [remainding] of 2009. The market conditions remained largely unchanged with the retailers and distributors continuing to focus on enhancements in the operational efficiencies, costs and programs to help maintain and improve their share of wallet. This approach to the market is reflected in new wins we announced during the third quarter.

For example, Big Y Foods, a leading independent supermarket chain with 57 stores, and recognized as one of the grocery industry early adopters and leaders of loyalty programs, successfully rolled out Retalix Loyalty as its next generation customer marketing system. A long time user of Retalix StoreLine point of sales, Big Y selected Retalix Loyalty because of its functionality and ability to handle targets and sophisticated promotions through integration with the Retalix StoreLine.

Price Chopper, which operates 190 grocery stores, chose Retalix Yard Management to synchronize yards and dock activity at the company's distribution center. The solution will provide them with real time control over all yard and dock operations in their distribution centers, providing higher supply chain visibility, efficiencies, and productivity.

Wesco, a convenience store chain with 51 locations, chose Retalix DAX Analyzer to further enhance its demand forecasting and replenishment operation. DAX Analyzer will integrate with the retailer's existing installation of Retalix Demand Analytics solution, and give company management more tools for inventory and replenishment management. To date, the system has helped Wesco experience a 37% inventory reduction, and 53% out of stock reduction.

We also had a very successful, well-attended user conference just last week in Dallas, Texas. The theme of the conference was ROI, and in [Retalix-land], which that represents Relationship, Opportunity and Innovation. The conference was designed to help retailers and distributors learn how to better utilize current systems and exploit new technologies and processes to maximize their business performance, or in other words, ROI.

At the beginning of 2009, we announced a conservative outlook for the year, expecting Retalix revenues to be between $180 million and $200 million, GAAP net income to be between $1 million and $6 million, and adjusted non-GAAP to be between $5 million and $11 million.

We believe that we are on track to meet our revenue forecast for the year, and that Retalix will meet and exceed the high end of the range forecast for both GAAP net income and adjusted non-GAAP income.

Finally, as we announced on September 3, Retalix entered into an agreement with a group of the investors for strategic financial transaction. The group of investors is -- includes five individuals who, together, represent a strong, successful and proven team of investors and senior executives in Israel. This group founded and grew Amdocs Limited, a New York Stock Exchange listed company, from its startup to a position of global market leadership in the telco industry, with revenues of over $3 billion.

The Retalix shareholders, at its annual meeting in October, voted to approve the agreement, and the transaction is expected to close later this month. Details of this transaction are described in the Retalix September 3 press release, and the filing with the SEC.

Concurrent with this transaction, I announced my intentions to retire at the end of this year. I founded Retalix 27 years ago, and it has been my extreme pleasure to lead the Company during these years, and to see it flourish into a global industry leader. I am working with the investors and [Shooki] Sheffer, the intended CEO, to provide a smooth transition.

I have full trust in this investor group, and I am confident that Retalix will continue to grow and expand with this new leadership.

In closing, let me once again acknowledge my deep appreciation for the dedication efforts of the employees worldwide, support of all our customers, and for your interest and support. In the last 27 years, I have been given a once in a lifetime experience that no money could buy. I thank you all for that.

Thank you for attending, and now we will be happy to answer your questions.

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. (Operator instructions) The first question is from Ziv Tal of Oscar Gruss. Please go ahead.

Hi, Barry and Hugo. Barry, good luck on your new way.

Thank you.

My question is with regard to new -- potential new [tier one] opportunities looking into 2010. Do you see any opportunities down the road, or in your pipeline at the moment?

Well, there are a few retailers looking around and just checking the water regarding changing of systems. We don't see major retailers doing changes immediately, but definitely, we can see a pickup in interest in new systems either at the store level, or at the headquarters around purchasing and warehouse management. So definitely, there is some kind of pickup in interest.

Okay. And Hugo, with regards to the framework of operating expenses for 2010, do you see any significant changes from the current structure?

I think it's a bit early, Ziv, to talk about 2010. The only thing I can say is that the current structure is a stable structure. After we conclude our plans for next year, we will see if there is any adjustments we want to do to that plan.

Okay. And I know that you've reiterated your guidance, but I'm just trying to understand what it is comprised of. Are there many deals that you need to close before the end of the quarter, or -- I mean, is it very, very stable in that [sense]?

Well, as you know, the current situation has been soft in terms of top line, and we've taken that into account in our guidance that we've given out.

All right. And Hugo, on DSOs, do you see any potential to reduce -- to come down from the 107 days or 106 days that you've reported, looking into next year?

Well, this is a process. We did a significant reduction in the last few quarters, so right now we are stabilizing at this level. We continue with efforts to further reduce it. I don't see anything major to happen in the next few months, so it should be similar.

Okay. And last for me, looking at your competition, the estimates in the market are for growth of high single digits for 2010. Would you say that that also applies for Retalix? What efforts about that?

Well, it's still early to discuss that, and on our next call, we will be discussing that.

Okay. Thank you very much.

(Operator instructions) There are no further questions at this time. I would now like to turn the call over, back to Mr. Shaked. Mr. Shaked, would you like to make your concluding statement?

Thank you, everyone, for listening, and as this is my last conference call, over and out.

Thank you very much.

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