NCR Voyix Corp (VYX) 2010 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Retalix Q3 2010 conference call. As a reminder, this conference is being recorded. Today is November 18, 2010. Leading the call is CEO for Retalix, Shuky Sheffer. Joining him is Hugo Goldman, the Company's Chief Financial Officer.

Before I turn the call over to them, I would like to remind 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 rate, the Company's ability to improve cash flow and profitability, expectations about the Company's pipeline of customers, anticipated demand for the Company's software products and services and the 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 protection for such statements contained in the Private Securities Litigation Reform Act of 1995 and the US federal securities laws. Actual results may differ from those discussed today, and we would like to refer you to a more detailed discussion of all 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 20F5 with the SEC on June 15, 2010.

I'd also like to remind you that Retalix reports its operating income, 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 Investors section of the Company's website at www.retalix.com. Now I will turn the call over to CEO of Retalix, Mr. Sheffer. Please begin.

Thank you, Risheva. Welcome and thank you for joining us on this call. On this call we wanted to review with you the financial results we reported this morning. I will also give you an update on our views of the market and gross opportunities for Retalix. We achieved increases in all the financials of our matters while at the same time continuing to build our growth engines in investing our business to Retalix for the next level. The reported gross internal revenues and net income in GAAP and non-GAAP in the year ago sales quarter and the second quarter of 2010. We also continue generate positive cash flow from operations.

Today we reported total revenues of $52.9 million and non-GAAP operating income of $5.3 million for the three months ended September 30t10. Combining the results of sales six months of 2010, we are on track with our plan for 2010. We are making solid progress against our goals. We are winning new customers and further developing opportunities with our current customers. At the same time, we are focusing our efforts on developing and enhancing our demand driven store platform and supply chain for that.

We are also holding out new differentiated sales offering that levels out specific refilling and provide unique advantage to our customers. We continue to receive positive feedback from our customers on our efforts. Last week we hosted our largest and most successful user conference since we started the event six years ago. Attendance was up 10% over the last sales conference. Over 400 customers and about 150 partners from 59 different companies, plus analysts attend the three-day program. I will talk in more detail about the market environment in our next steps, but first let me hand the call over to Hugo to review the financial results for the third quarter and first nine months of 2010.

Thank you, Shuky. We have solid financial results for the quarter which are on track with our plan for the year. We recorded increases in total revenues in net income, GAAP and non-GAAP, more than $5.3 million in operating income non-GAAP. Improved our profitability versus 2009 and generated a healthy $13.3 million in cash flow from operations. Cash on our balance sheet increased to about $120 million. This is why we also proceeded with our investments in Retalix's product and service offerings, enhanced our operations and customer service and continued with our efforts designed to build our future opportunities. Total revenues for the third quarter of 2010 were up versus both the previous quarter and versus a year ago third quarter. We reported $62.9 million in revenues for the three months ended September 30, 2010 compared to $50.1 million in the year ago third quarter.

In the nine-month period we reported total revenues of $153.6 million in 2010 versus $146 million for the same period in 2009. Looking at the revenue mix, software revenues continue to grow during the third quarter of 2010. Software revenues were 14% this quarter of revenues compared with 12% in the second quarter of 2010 and 11% of total revenues in the third quarter of 2009. Maintenance revenues derived from our products were 30%, professional services were 40% and hardware revenues were 16% of total revenues. Adjusted income from operations in non-GAAP was $5.3 million. This compares with $4.9 million in the third quarter of 2009. GAAP income from operations was $3.4 million, similar to the second quarter of 2010 and the year ago third quarter . Included in this is an increase in our share compensation expenses versus the year ago.

As I mentioned, we are continuing to add to our headcount to enhance our customer fighting teams and being our (inaudible) organization in addition to realigning internal resources to focus on the best opportunities. Our headcounts have increased by close to 100 people versus the year ago. While building our growth engines, we also maintain our 10% non-GAAP operating margin in the third quarter. As we reported on prior calls, we are carefully managing our operating expenses with (inaudible) and marketing and G&A, each stable as a percent of total revenues. Additional interest income versus 2009, combined with a -- currency fluctuations on the value of our non-dollar assets and foreign currency transactions produced a net of $2.7 million in financial income for the third quarter of 2010. In the year ago third quarter, we had $1.5 million in financial income.

For the nine months, we are reporting financial income of $1.5 million ,which is comparable with $1.6 million in financial income for the first nine months of 2009. We reported improvements both in GAAP and non-GAAP basis. Our non-GAAP net income was $6.5 million in the third quarter of 2010 versus $5 million in the year-ago third quarter. Earnings per share was $0.27 versus $0.24. All of the per share figures I am discussing here include an increase in the weighted share to 24.2 million shares in 2010 versus 20.4 million shares in 2009. The increase reflects the share (inaudible) groups by the placement completed in November 2009. GAAP net income was $4.7 million in the third quarter of 2010 versus $4.2 million in the year ago third quarter.

Net income per share was $0.19 versus $0.20. For the first nine months of 2010, we are reporting an increasing net income from operations non-GAAP to $13.1 million versus $12.9 million in the year ago nine months. The per share earnings were $0.54 a diluted share versus $0.64 in the year ago nine months. For the nine months the GAAP net income was $8.2 million versus $9.8 million in the year ago period. As I mentioned above, this includes higher stock based compensation expenses for 2010. The per share earnings were $0.34 versus $0.28, also including the changing the weighted shares outstanding.

Turning to the cash flow, this quarter we generated a very healthy $13.3 million in cash flow from operations including $7.5 million related to a tax refund. We are continuing our attention to receivables in collections. Total trade receivables amounted to $62.8 million at the end of the third quarter. The increase in our trade receivables is directly related to the increases in business activity. Our DSO remains mostly stable. It was 104 days at the end of the third quarter of 2010 versus 106 days in the year ago period. Our balance sheet strength continue to grow. We have increased to about $120 million in cash, cash equivalents reported in marketable securities. This is up from the $107.5 million at the end of the second quarter. This equates to nearly $5 per share in cash on our balance sheet, demonstrating the strength of Retalix's own customers and providing us ability to pursue future opportunities. (Inaudible), now I will turn the call back to Shuky.

Thank you, Hugo. Let me continue by giving a brief update on our market and our plans for the future. As I said in my opening, we just completed our most successful user conference in the history of Retalix with the (inaudible) including our customers , partners and leading industry analysts. Opinion leaders addresses our customers, and we conducted an over 150 break-out sessions. We shared with our customers and partners our views of the market, our strategy for the future. We are receiving positive feedback from our customers, partners and industry analysts about our directions. One of the key teams (inaudible) from the conference was the changes coming about in (inaudible) Consumers continue to be very conscious, and competition is increasing in monthly (inaudible). The (inaudible) understand they must build strong ties with the consumers and need to personalize the shopping experience across all the tough points where they interact with customers consumers.

As one of the keynote speakers told the audience, the face of change in Retalix is escalating. While innovation remains vital to the market, the speed at which Retalix can bring innovation to the marketplace is becoming increasingly critical Retalix and industry analysts from the major (inaudible) concerned viewing out user conference. What we have been saying is a point of sale, or POS, is evolving to the store platform that supports all touch point with consumers and is the foundation of all that (inaudible) that operates in the store.

With that information, system use in leading publication in our industry was at our conference reporting defining of its new research into the evolution of the store platform. This recently was done just last month confirms recent key trends and opportunities for Retalix that we've highlighted in our previous quarters. According to the report, only a quarter of retailers had store solution in place that meets the current needs and that will continue to meet their needs over the next several years. More than two-thirds of the retainers we quoted which is (inaudible) solution, and is also hard to rate functionality in new models.

More than two-thirds of the retailers reported that you have to upgrade all other current store solution. It is also hard to raise functionality in new models. The major concerns is that existing store solution is not aligned with future needs. Industry analysts from top retail streams also voice this view of the changes and opportunities for this, for the store platform during our year ago conference. Typically, store solution software tend to (inaudible) life cycle. Major retailers are not undertaking a major outgrowth in preparation for the year 2K. Understanding that these are the trends providing the future opportunity of Retalix, we have designed a growth image for Retalix. We are making progress and continue to invest in each of these initiatives. First and foremost has been our effort to focus on our demand driven store platform and all supply chain solution. The key to this effort is ensuring that we are providing an architecture that enables quick time to market, multiple deployment option, the full range of sales batch point and support application ranging from store loyalty programs to demand focusing and replenishment. We have stopped reviewing the past about our efforts to enhance our services offerings. This is our second growth engine.

Our focus is on developing unique offering which build our strong software and (inaudible) Retalix versus the competition. This is a unique business model with great product led services that levels our retailing experience and provide differentiated value in services. For example, before our software solutions, our mission critical application for our customers, they are very cautious on the rollout of new versions. Typically, the rollout is very time consuming for our customers. Understanding this cautiousness and leveraging our unique understanding of the application, one of our first new services offerings also made for testing. This service address retailers' inherent cautions while also significant spinning out the rollout and improving the quality of the production of our solution into the stores. We operate to (inaudible) if they had the services that provides new access to our social engineer two speed solution. These are just two example of the (inaudible) is offering ranging from program and project management, testing and training, as we are starting to roll out from global services group.

We are continuing to recruit and build our teams in the view of significant growth engine for Retalix. The sales growth volume for Retalix opportunities is aligned blurring with (inaudible). As you know, fast-moving consumer group (inaudible) such as department store and healthy and beauty retailers are increasingly offering (inaudible) to their store. It is a way to build customer traffic and loyalty. Retalix reach even high volume, highly accomplished returning environment. As the segment continues to blur, our listable market is long. We already get successful relationship with number of these fast moving consumers and retailers, and we're moving generally to target in pursue the opportunity within this segment. Including these adjacent markets, we currently believe that our total addressable markets has gone to $7 billion to $8 billion, based on the analog spending , but you also (inaudible) distributor and fast-moving consumer retailers. Software as a service will also speed the delivery of innovation into the market and will be another growth driver for Retalix.

Currently, we are successfully offering software as a service to 4,500 stores, and will be expanding our offering in this segment. We believe that each of these growth engines can help us to take Retalix to the next level. Helping Retalix to understand how to address the trends as we are reshaping the market and getting solutions integrated into the operations in one of the Retalix key strengths.

So, in 2010, we have been building these initiatives while also focusing on operational excellence and enhancing customer service, delivering product to our customers and winning new customers. For example, we recently allowed one of our current customer, Wesco convenience stores selected us to create newly fully integrated retail and supply chain technology system that enhances their efficiency and increase customer service and loyalty. Wesco, a convenience store chain headquartered in Michigan, is replacing (inaudible) that was fragmented. There will any Retalix store point POAs, desk, office and HQC solutions, as well as to Retalix life to the existing Retalix installation to create new totally integrated technology solution. This is just one example of our customer wins this quarter. We are excited about the opportunities that lay ahead. We are building on Retalix's strong foundation to drive our goals.

As I said in my opening remarks, we are executing against our plan and continue to make steady progress and improvement across our business designs to realize these opportunities. Today we are reiterating our guidance we gave in August 2010. We expect total revenues to be in the range of $200 million to $210 million, and as we have similar or better profitability in 2009. The size of our performance in the first nine months give us the confidence to be on track for th year. In conclusion, we appreciate your support and interest in Retalix. We are confident that we have the (inaudible) in leadership that is providing a solid foundation and will continue to drive Retalix future growth. Thank you for you attention, and now we are open to answering your questions.

Thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session. (Operator Instructions) Please stand by while we poll for your questions. (Operator Instructions) There are no questions at this time. I will now turn the call over back to Mr. Sheffer. Mr. Sheffer, would you like to make your concluding statement.

Yes. Thank you all, and looking forward to talk to you again. Thank you very much.

Thank you. This concludes Retalix's third quarter 2010 results conference call. Thank you for your participation, you may go ahead and disconnect.