NCR Voyix Corp (VYX) 2011 Q1 法說會逐字稿

Welcome to the Retalix conference call. As a reminder, this conference is being recorded today, May 5, 2011. Leading the call is CEO of 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 our listeners that management's remarks contain forward-looking statements. These statements include comments regarding the guidance and expectations about revenues, net income, margin, expenses and tax rates, the Company's ability to improve cash flow and profitability, expectations 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.

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 other 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 in the Company's filings with the SEC, and in particular, on its annual report on Form 20-F, filed with the SEC on April 14, 2011.

Also, I would 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 on the Investor section of the Company's website at www.Retalix.com.

Now I will turn the call over to the CEO of Retalix, Mr. Sheffer. Please begin.

Welcome and thank you for joining us on this call. This morning we announced our financial results for the first quarter of 2011. We achieved another quarter of growth, continued to execute on our plan. We maintained a similar level of profitability and generated strong positive cash flow from operations.

All of this, also while we continued to develop the growth engine for Retalix, and working with strategic customer and investing in projects that we believe will contribute to the future performance of the Company.

We reported an 11% increase in total revenues compared to the first quarter of 2011 and over -- 2010, sorry -- to over $54 million. We also maintained profitability, reporting $4.8 million non-GAAP operating income and $3.3 million net income non-GAAP for the quarter. At the same time, we also produced a strong positive cash flow from operations with $6.7 million generated this quarter.

During the quarter we won new customers and successfully delivered and implemented a range of projects for our customers. We continue to actively engage with a lot of customer and potential customers, discussing their needs for innovation and the unique solutions Retalix provides.

In January we launched our new Retalix 10 Store Suite. We have had strong initial response on the market for this product, which we believe confirmed the uniqueness of this offering.

Our system integrations business also continued to build and attract strong interest from retailers. We are winning SI business, and we are integrating it into our programs to grow the overall size of our customer engagements. We are pleased with the progress we are making and believe we have a good start to 2011.

In a moment I will talk in more detail about the market environment and our next steps. But, first, let me hand the call over to Hugo Goldman, to review the financial results for the first quarter.

Thank you, Shuky. As Shuky said in his remarks, we are continuing to grow total revenues and maintaining the level of profitability by carefully managing our efforts. We are enhancing the strength of our balance sheet with a strong, positive cash flow from operations.

Total revenues for the first quarter of 2011 were up versus both the previous quarter and versus the year-ago first quarter. We reported $54.1 million in revenues for the three months ended March 31, 2011, compared to $48.7 million in revenues in the year-ago first quarter.

Looking at the revenue mix, software revenues were 10% of this quarter's revenues. Maintenance revenues derived from our products where 28%. Professional services were 61% and hardware revenues were 11% of total revenues. The quality of our mix improved again in the first quarter of 2011 with a percentage of revenues from hardware continuing to decline.

As we discussed with you on our last call, we are maintaining similar levels of profitability in 2011. This quarter we achieved an 8.8% operating margin, which is an improvement over the previous quarter, while executing on our strategy and growing our operations.

Our total headcount in the first quarter of 2011 is up by approximately 115 people versus the first quarter of 2010.

Adjusted income from operations non-GAAP was $4.8 million in the first quarter of 2011. This compares with $4.7 million in the first quarter of 2010. GAAP income from operations was $3.4 million in the first quarter versus $2.9 million in the first quarter of 2010.

Overall operating expenses were similar to the previous quarter. We recorded our financial expense of $278,000 in the first quarter of 2011, as a result of the impact of currency fluctuations on the value of our non-dollar assets and currency translation costs net of interest income.

In the year-ago first quarter we had a financial expense of $356,000. As we said in our last call, due to the fluctuations in the currency market, we are not expecting in 2011 to have a similar level of financial income, if any, to that reported in 2010.

Our non-GAAP net income was $3.3 million or $0.13 per diluted share in the first quarter of 2011 versus non-GAAP net income of $3.3 million or $0.14 per diluted share in the year-ago first quarter. The weighted number of average shares for the first quarter of 2011 is approximately 24.7 million fully diluted shares versus 24.2 million fully diluted shares for the first quarter of 2010.

GAAP net income was $2.3 million or $0.09 per diluted share in the first quarter of 2011 versus GAAP net income of $1.9 million or $0.08 per diluted share in the year-ago first quarter.

Turning to the cash flow. This quarter we generated $6.7 million in cash flow from operations. We are continuing our attention to receivables and collections.

Total trade receivables amounted to $57.4 million at the end of the first quarter of 2011 versus $56.6 million at the end of 2010. Our DSO improved to 93 days at the end of the first quarter of 2011 versus the 103 days at the end of the fourth quarter of 2010.

Our balance sheet strength continued to grow with an increase to over $140 million in cash and cash equivalents, deposits and marketable securities at the end of the first quarter of 2011.

Now I will turn the call back to Shuky.

Thank you, Hugo. As I said in my opening remarks, we are pleased with our progress and the good start to 2011. Our efforts in 2010 were designed to ensure that Retalix is well-positioned with a strategy, organizational structure and innovative solution needed to address the trends that are concerning retailing.

New technologies will have a great impact on the store environment. Retailers understand the potential and are increasingly focusing on the use of these new technologies and how they can improve the customer experience -- the consumer experience, sorry. They understand that incorporating these technologies into their operation will help them to (inaudible) their stores with the consumer.

We think senior executives are increasingly discussing in their public remarks and in meeting with analysts and with us the need for innovation and their belief that they need innovation in order to take leadership in their markets. They recognize that their ability to quickly and efficiently deploy innovation is a key success factor.

However, market research from the leading industry analyst highlights that retailers also believe their existing systems are hard to upgrade and not designed to incorporate these new technologies.

Our strategic direction in innovation was again validated through our discussion with our customers and industry analysts attending the National Retail Federation, NRF, annual conference which took place in January in New York.

The NRF provides us a good opportunity to engage with a lot of customers and global retailers on consumer views of the marketplace and opportunities. We saw extensive signs of the increase in cross channel retailing, retailers' need for store platform with multichannel consumer touch points and the need to rapidly integrate new technologies into their operation.

We are confident we have the growth engine defined for Retalix to take full advantage of the trends we see in the marketplace. We are building on our strategy of offering leading products and unique products and services that leverage our (inaudible) for [digital] retailing.

Our growth drivers are beginning to produce results and demonstrate in the first quarter. We are delivering a broad range of products to global retailers. During the first quarter we also won a number of new customers. We are creating strong interest and we are seeing very positive feedback from customer and leading industry analysts on our initiatives, including the launch of Retalix 10 Store Suite and our re expanded system integration services offering.

We are beginning to leverage these strengths and our experience to sign long-term, multiyear contract with customer. We believe this is a significant demonstration of the customers' confidence in Retalix, and for us it provides better visibility and more efficiency in our operations.

As you will recall, we defined four growth engines. Our new integrated store solution, Retalix 10, our value-added services that leverage our product and retailing expertise, new market opportunities both from new geographies and with the blurring of retail segment, and building on our successful effort in providing software as a service.

I wanted to spend a few moments discussing our success this quarter with the first two growth engines, our product and our SI offering. The Retalix 10 Store Suite, which we launched in January (inaudible), is a differentiating product, both for Retalix versus our competition, and for retailers who will deploy its unique architecture and functionality.

Retalix 10 fully integrates key functions such as customer touch points, store management, target promotion and loyalty, unifying the management deployment of the installed system on the storefront and mobile commerce.

Its (inaudible) advanced software applications, flexible deployment option and unique architecture will seamlessly combine major customer-centric retailing functions, while enabling quicker time-to-market and reducing the total cost of ownership.

The Retalix 10 Store Suite will be generating a lot of excitement in the marketplace. It provides meaningful advantage both for our existing customers to upgrade, and for new customers looking for the most advanced solution on the market today.

As we said in our January press release, several leading retailers have already shown interest in Retalix 10, including Tesco, which is already in the process of upgrading its store solution worldwide to Retalix 10 Store Suite.

We are pleased with the initial response to Retalix 10. The (inaudible) is a longer sales cycle, and while it will take time to create momentum for this offer in the marketplace, we believe that the uniqueness of Retalix 10 Store Suite will help speed retailers' decisions.

We launched our expanded SI offering in 2010, and we are continuing to build these opportunities with existing and new customers. SI is permitting us to increase the share of wallet with customers by signing large contracts.

We are employing the unique business model that directs product-led services, that leverage our expertise -- our retailing expertise and provide differentiated value-added services for our customers around the products, including testing, automation, training, deployment and support services.

This offer is being integrated into our customers' projects to provide larger, more comprehensive solutions for retailers. One successful example of this strategy is a new contract we just signed in the UK with the Southern Co-operative Ltd. They operate over 150 stores in Southern England.

This contract is an example of the comprehensive solutions we can provide. The quarter with Southern Co-operative encompass our store solution, loyalty, and replenishment programs, and included site services ranging from testing to deployment and support. Our SI work was integrated into the overall project and included as part of the initial contract as opposed to being an add-on in later days.

We are excited about the opportunities that lay ahead, while executing on our plan and our business pipeline is improving. Today we are reiterating our guidance for 2011 that we first announced in March this year. We said that we expect total revenues to be in the range of $217 million to $228 million for the year.

We also expect to achieve at least the same level of profitability in 2011 as compared to 2010. While we also continue to invest in projects with our strategic customers, we will, of course, continue to monitor the market closely and engage our customers seeking to maximize opportunities as 2011 progress.

In summary, we are pleased with our progress and good start for 2011. We are working hard to execute on our plan to build growth for Retalix. Our strategy is to have leading products and expanded product-led services offering. We are gratified by the positive response and feedback we are receiving from our customers and new potential customer, as well as the leading industry analysts.

We have our growth engines in place, and they're starting to contribute to our performance. We look forward to building on this in the coming quarters.

Thank you for your attention. And now let me open the call for questions.

Ladies and gentlemen, at this time we will begin the question-and-answer session. (Operator Instructions). Josh Schwartz, Flatbush Watermill.

Thanks for taking the question. Just two things. Shuky, just to clarify, I realize you have been clear that the Company you believe is having some success in attracting interest on the new services. But did the services contribute meaningful revenue in the quarter? I'm just curious.

Not meaningful, some. But I think what is more important that the majority of our services contracts are long-term contracts that give us two things. First, it give us long-term visibility. And they will continue much more in the quarters that are coming.

Secondly, because they are long-term contracts, it helps us to build more efficiency into this activity, which I believe that will also lead to better profitability in the future.

Okay, great. The second question I had is with respect to R10, can you just discuss what you think the Company needs to do as you continue down the road here to convince existing customers and prospects about the viability of the product and its differentiation, so that they ultimately move forward and execute a contract? What kinds of things do you think, as you have started the process of selling it, do you believe the Company needs to focus on?

I think what activities that -- we will do several activities to achieve this goal. First of all, we are addressing all our account-based customers, and we show them all the capabilities of R10. And I can add that the majority of the response is very excited. I think that -- so, to start with we are, as I said, showing this offering to all our existing customers, and it is very -- we get very positive feedback.

The other thing is today when we compete and bid we are doing it with the new R10 offering. I can tell you that so far I believe, as I mentioned in my -- in this call, that this is a unique offering in the market which is better than any competitive offering.

For new customers sometimes this is a long sales cycle. However, as I said, I believe that with all the pressure for more innovation in a shorter time, and the way that Retalix stands -- is built that you can add on components, not necessarily with a big bang. I think that this will shorten the sales cycle.

So, as I said, our strategy -- obviously, we continue with marketing activities, working with industry analysts, etc. But we are addressing both customers -- new customer and existing customer, and so far we're getting very good feedback.

Is there any feature function that you believe would be strategic in the sense the Company -- that it would be vital for the Company to put on to R10 to convince certain prospects, or is the architectural difference enough for today? I am just curious what you think about that.

I think that what Retalix [products] encompass, meaning that it serves a platform for every touch point. This is the unique advantage. So our customers of today sometimes have two, three, four, five solutions ranging for one for the POS, one for the checkout, one for the scanning, home shopping, area scans, mobile applications. The fact that this is one solution that can address everything is the key.

So our customers that today wants, for example, to add-on a mobile application with Retalix 10 it is not a difficult thing to do comparing to the older platform.

Obviously, the flexible deployment option that you can run with the system also is a big differentiator, which also we believe can help and support the retailers.

But, all in all, I think that this is not a promise for the future. Today, with the current needs of the retailers that is ranging from introducing mobile applications to difference self scanning, etc., this is something which can give them a benefit immediately, and this is why I believe we see a lot of interest from customers.

Thanks very much.

(Operator Instructions). [Larry Tedeschi], Ohio Teachers Retirement Fund.

Where do the retailers stand right now on their willingness to spend money on new systems? I know for a while when things were really bad that they weren't willing to do that much. I was just wondering on that update on that front.

I think we see more openness to start and do changes in the store environment. But as you know, to replace a store system is not something easy, and people take the time to take the decision.

I think one of the uniqueness of our offering is that we -- as I mentioned before, Retalix 10, if you want to start gradually and start to introduce -- for example, you want to start with a mobile application and then (inaudible) check out, and do a gradual implementation, the unique architecture allows this, comparing to the competitive solution.

So to your question, first, we see more activity in the market in this regard. And, second, because we are offering people can see immediate value to their current need, so this get them very excited and makes them make the decision faster.

Okay, thank you.

There are no further questions at this time. I would now like to turn the call back to Mr. Sheffer. Mr. Sheffer, would you like to make your concluding statement?

Yes, thank you. Thanks everyone, and looking forward to talk to you in the next quarter. Thank you.

Thank you.

This concludes the Retalix first-quarter 2011 results conference call. Thank you for your participation. You may go ahead and disconnect.