Retalix's CEO Discusses Q2 2012 Results - Earnings Call Transcript (Prepared Remarks)

Retalix Ltd. (RTLX)

Q2 2012 Results – Earnings Call

August 8, 2012, 9:00 AM ET

Executives

Shuky Sheffer – CEO

Sarit Sagiv – CFO

Presentation

Operator

Welcome to the Retalix conference call.

As a reminder, this conference call is being recorded today, August 8, 2012.

Leading the call is Retalix's CEO, Shuky Sheffer. Joining him is Sarit Sagiv, 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, but are not limited to, comments regarding the guidance and expectations about revenues, DSO, financial income and profitability, expectations about the Company's pipeline of customers, addressable market and market trends, expected drivers of the Company's growth, anticipated demand for, and expected investments in, the Company's products, services and new offerings, management's expectations as to the Company's future financial performance, outlook for 2012 and future strategies, plans and opportunities.

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 all these risks and uncertainties contained in today's press release and in the Company's filings with the SEC, and in particular in its Annual Report on Form 20-F filed with the SEC on April 5, 2012.

Also I'd like to remind you that Retalix reported income from operations, operating margin, net income and earnings per diluted 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 Relations section of the Company's Web site at www.retalix.com. The press release showing the second quarter and six month non-GAAP reconciliations can also be found on this site.

Now I will turn the call over to the CEO of Retalix. Mr. Sheffer please proceed.

Shuky Sheffer

Thank you Michal.

Welcome and thank you for joining us on this call.

This morning we announced our financial results for the second quarter and the first six months of 2012.

We had another strong quarter, again recording record revenues and good improvements in operating margins and net income. We are executing on our strategy in a disciplined manner, delivering on our commitments to our customers and winning new programs and logos for our products and services.

The positive response we are receiving from retailers is demonstrated in the wins and the financial results we are reporting for the quarter. It was another consecutive quarter of growth for Retalix.

Revenues increased 18 percent year-over-year to 68.2 million dollars in the second quarter and Net Income Non-GAAP was up 36 percent year-over-year to 5.2 million dollars in the second quarter.

We continue to build across all our lines of business and around the globe. We had more Retalix 10 wins, including another Tier 0 retailer, and good progress with our recently launched Retalix 10 Mobile offering, which also won a Tier 0 retailer. Retalix 10 continues to gain recognition from retailers and industry analysts as the most advanced platform available today on the market.

Our services offerings, including Systems Integration, also continues to generate strong results. This quarter we won a large, multi-year managed services program from a Tier 0 retailer. This is significant in that it is our first managed services contract and demonstrates our success in expanding the long-term strategic relationships that we have with retailers.

Our Connected Payments Software-as-a-Service solution is also performing nicely. We are winning Connected Payments business, including a Tier 0 retailer this quarter, and deploying this offering for a broad range of retailers.

Our wins this quarter, including the managed services deal, highlight the opportunities in our business model. Our model creates value for retailers by combining innovative products and leveraging our unique product and domain expertise with product-led services. We are helping retailers create a fully integrated, multi-channel environment that differentiates their shopping experience for consumers and improves store operations.

In a moment I will talk in more detail about our progress this quarter and how we are working to leverage these strengths to realize the opportunities in the market. Before that let me hand the call to Sarit who will review our financial results in the first half of 2012.

Sarit Sagiv

Thank you Shuky.

Retalix continued its solid financial performance with good results for the second quarter and the first six months of 2012.

Total revenues were up 18 percent in the second quarter to $68.2 million dollars versus $57.8 million dollars in the year ago second quarter. For the first six months of 2012 total revenues are up 20 percent to 133.9 million dollars versus the year ago period.

Looking at the revenue mix in the second quarter, software and hardware revenues were each approximately 10 percent of revenues, maintenance revenues derived from our products were 25 percent, and professional services including our SaaS revenues were 56 percent of total revenues. The fluctuation in license revenues quarter to quarter was expected and as we mentioned on the previous call some of the fourth quarter 2011 wins were reflected in first quarter 2012 license revenues.

We continue to report improving non-GAAP operating margins due to our growth in revenues and careful management of our expenses. We reported a 9.9 percent non-GAAP operating margin in the second quarter versus 8.8 percent in the year ago second quarter and 9.4 percent in the sequential quarter. For the first six months of 2012 we had a 9.6 percent non-GAAP operating margin.

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